Research output: Working paper
Research output: Working paper
}
TY - UNPB
T1 - Non-Audit services, auditor independence and earnings management
AU - Singh, A
AU - Gore, J P O
AU - Pope, P F
PY - 2001
Y1 - 2001
N2 - We predict that the provision of non-audit services by auditors to their audit clients will impair independence more severely for smaller auditors than for large auditors. We report evidence that client earnings management activity to avoid losses and earnings decreases is positively associated with the ratio of non-audit fees to total fees for non-Big 5 auditors but not for Big 5 auditors. Earnings management to meet analysts' forecasts varies positively with the non-audit fee ratio for both Big 5 and non-Big 5 auditors. Further, the difference in the effectiveness of Big 5 and non-Big 5 auditors in constraining earnings management widens as the non-audit free ratio increases. These results suggest that, when the provision of non-audit services is relatively high, smaller auditors are less able to resist aggressive accounting by their clients.
AB - We predict that the provision of non-audit services by auditors to their audit clients will impair independence more severely for smaller auditors than for large auditors. We report evidence that client earnings management activity to avoid losses and earnings decreases is positively associated with the ratio of non-audit fees to total fees for non-Big 5 auditors but not for Big 5 auditors. Earnings management to meet analysts' forecasts varies positively with the non-audit fee ratio for both Big 5 and non-Big 5 auditors. Further, the difference in the effectiveness of Big 5 and non-Big 5 auditors in constraining earnings management widens as the non-audit free ratio increases. These results suggest that, when the provision of non-audit services is relatively high, smaller auditors are less able to resist aggressive accounting by their clients.
KW - Non-audit services
KW - Auditor independence
KW - Audit quality
KW - Earnings management
KW - Discretionary accurals.
M3 - Working paper
T3 - Accounting and Finance Working Paper Series
BT - Non-Audit services, auditor independence and earnings management
PB - The Department of Accounting and Finance
CY - Lancaster University
ER -