Download or read book Evidence of a Nonlinear Association Between Auditor Provided Non Audit Services and Audit Quality written by Erik Beardsley and published by . This book was released on 2018 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the possibility of a nonlinear association between auditor-provided non-audit services (NAS) and audit quality. The effect of NAS on audit quality has been a long-standing debate among academics and regulators. One view is that NAS can potentially create economic bonding between the auditor and client, lowering audit quality. Another view is that NAS creates knowledge spillover, improving audit quality. Our unique approach provides evidence of a nonlinear association between NAS and audit quality, where client misstatement rates are higher for audit offices with both high and low levels of NAS. We also find a nonlinear association between NAS provision and both missed material weaknesses and meeting or beating analysts' consensus forecast by a small amount. This study should be of interest to audit firms, audit committees, and regulators because it advances our understanding of the effects of NAS on audit quality.

Download or read book The Nonlinear Association Between Abnormal Audit Fees and Audit Quality written by Sui-kwong Alan Ho and published by . This book was released on 2008 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Relation Between Auditors Fees for Non Audit Services and Earnings Quality Classic Reprint written by Richard M. Frankel and published by Forgotten Books. This book was released on 2018-03-03 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from The Relation Between Auditors' Fees for Non-Audit Services and Earnings Quality This paper provides empirical evidence on the relation between non-audit services and earnings quality. We test hypotheses concerning: (1) the association between a firm's purchase of non-audit services from its auditor and earnings management, and (2) the stock price reaction to the disclosure of non-audit fees. In the past decade there has been a dramatic increase in the proportion of fee revenue auditors derive from non-audit services, yet we know little about how non-audit services are related to earnings quality.1 Concern about the effect of non-audit services on the financial reporting process was a primary motivation for the Securities and Exchange Commission (sec) to issue revised auditor independence rules on November 15, 2000. The rules require firms to disclose the amount of all audit and non-audit fees paid to its auditor. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.

Download or read book The Relation Between Auditors Fees for Non audit Services and Earnings Quality written by Richard M. Frankel and published by . This book was released on 2002 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the association between the provision of non-audit services and earnings quality. Because of concerns regarding the effect of non-audit services on financial reporting credibility, the Securities and Exchange Commission recently issued revised auditor independence rules requiring firms to disclose in their annual proxy statement the amount of fees paid to auditors for audit and non-audit services. Using data collected from proxy statements filed between February 5, 2001 and June 15, 2001, we present evidence that firms purchasing more non-audit services from their auditor are more likely to just meet or beat analysts' forecasts and to report larger absolute discretionary accruals. However, the purchase of non-audit services is not associated with meeting other earnings benchmarks. We also find that the unexpected component of the non-audit to total fee ratio is negatively associated with stock returns on the filing date. These results are consistent with arguments that the provision of non-audit services strengthens an auditor's economic bond with the client and that investors price this effect. Keywords: Auditor independence; Auditor fees; Earnings management; Discretionary accruals. JEL Classification: G12, M41, M43, M49, L84.

Download or read book The Relation Between Auditors Fees for Non audit Services and Earnings Quality written by Frankel Richard M and published by Legare Street Press. This book was released on 2023-07-18 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This groundbreaking study explores the relationship between auditors' fees for non-audit services and the quality of earnings reported by companies. Using data from a large sample of publicly traded firms, the authors show that there is a strong correlation between the two variables, and suggest that this could be a cause for concern for investors and regulators. The authors also provide recommendations for improving the transparency and reliability of financial reporting. This book is essential reading for anyone interested in the intersection of accounting, auditing, and corporate governance. This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work is in the "public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.

Download or read book Evidence on the Joint Determination of Audit and Non Audit Fees written by Scott Whisenant and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we investigate whether the characteristics of clients, auditors, and the auditor-client relationship simultaneously determine audit and non-audit fees. As done in prior studies, we maintain that fees proxy for the level of service provided and follow the physical flow of knowledge. Estimating single-equation models of audit and non-audit fee models, we confirm prior findings of an association between audit and non-audit fees. Studies have concluded such evidence is consistent with knowledge spillovers between the two services. However, we document empirically that audit and non-audit fees are simultaneously determined. Since the data indicate audit and non-audit fees are jointly determined, we then investigate whether previously documented associations between audit and non-audit fees are the result of biased estimation induced by using endogenous variables in single-equation models. In contrast to results from single-equation estimations, we find no association between audit and non-audit fees using a simultaneous specification of the fee system, suggesting that single-equation estimations suffer from simultaneous-equations bias. In sum, the findings are not consistent with the existence of economies of scope from the joint performance of audit and non-audit services after controlling for the joint behavior of audit and non-audit fees. Given the ongoing debate over the level of allowed non-audit services by auditors, the argument for the joint provision of audit and non-audit services is less justified than if joint-supply benefits had been documented.

Download or read book Director Auditor Link and Audit Quality written by Mazrah Malek and published by LAP Lambert Academic Publishing. This book was released on 2012-05 with total page 364 pages. Available in PDF, EPUB and Kindle. Book excerpt: Director-Auditor Link and Audit Quality aims to examine the effects of director-auditor link on audit services fee, non-audit services fee and audit opinion. Based on the attachment theory, it is argued that director-auditor link created by interlocking directorates enhances the mutual dependence and trust between the directors and their auditor and this mutuality is expected to influence audit services fee, non-audit services purchased from auditor and audit opinion. Analyses are conducted using data of 759 listed companies on the Bursa Malaysia in 2007 and a two-stage regression method is employed to accommodate the simultaneous equation model. The results show that director-auditor link has a significant negative relationship with audit services fee and significant positive relationships with non-audit services fee purchased from auditor and the issuance of unqualified audit opinion. Thus, the results provide initial evidence on the importance of reviewing the director-auditor link practices in the business environment.

Download or read book Differential Effects of Market Concentration on Oligopolistic and Atomistic Segments written by Hongkang Xu and published by . This book was released on 2016 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first essay, I divide the local audit market into the oligopolistic segment and atomistic segment and examine whether the differential effect of audit market concentration on audit fees, audit quality, and auditor switch in these two segments. I find that the market concentration raises the audit fees, but lowers the audit quality in the oligopolistic segment. In contrast, the market concentration lowers audit fees, but raises the audit quality in the atomistic segment. Moreover, I find that market concentration reduces the probability of auditor switch in both oligopolistic and atomistic segments. My findings reveal that audit market concentration only reduces the competition among oligopolistic segment. In contrast, the atomistic segment becomes more compressed and more competitive in a highly concentrated market. I also examine the nonlinear association between the auditor's market share and audit quality. I find that the relation between the market share and audit quality is an inverted U-curve. The second essay examines (1) the effect of real activities manipulation (RAM) on the audit report lags, (2) the impact of RAM on the audit fee and audit quality of industry experts, and (3) the linkages between accrual-based earnings management (AM), RAM, and audit fees. I find that RAM is associated with longer audit report lags. I also find that industry specialist auditor charge higher audit fees and make a more constraining influence on AM when their clients engage in aggressive RAM. However, I do not find that RAM affects the association between AM and audit fees.

Download or read book Association Between Audit Opinion and Provision of Non Audit Services written by Nasrollah Ahadiat and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Purpose - While a few US studies on the impact of the provision of non-audit services on auditor judgment have found potential harm to independence, it is the purpose of this study to investigate whether the British and Australian auditors' involvement with both audit and non-audit services for the same clients may also produce similar results.Design/Methodology/Approach - The parametric t-tests and the nonparametric Mann-Whitney tests are used in this study on the empirical data from the British and Australian companies to examine the potential for loss of independence when high levels of non-audit services are provided to audit clients.Findings - The results corroborated the US Securities and Exchange Commission's contention that the provision of non-audit services may indeed impair independence.Research Limitations/Implications - No attempts were made to isolate the effects of other factors that could result in the issuance of qualified opinions. In addition, the sample used in this investigation is comprised of firms that had voluntarily disclosed non-audit fees in the early years of the study. This could potentially introduce a self-selection bias. Nevertheless, this study is one of a kind in the international arena.Originality/Value - This paper extends the line of research examining the impact of non-audit services on the auditor's independence.

Download or read book The Relation Between Non audit Services and Auditor Independence written by Vivian Li and published by . This book was released on 2002 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Auditor Provided Non Audit Services in Listed and Private Family Firms written by Michael Dobler and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Purpose - The aim of this paper is to provide evidence on the extent and the consequences of the provision of non-audit services (NAS) by statutory auditors to German family firms.Design/methodology/approach - The study analyzes hand collected fee data of 368 listed and private family firms in Germany. It employs univariate tests, OLS and 2SLS regressions to investigate potential threats to perceived auditor independence and knowledge spillovers between jointly provided NAS and audit services.Findings - Incumbent auditors are shown to be a significant source of various types of NAS to family firms. There is weak evidence on threats to perceived auditor independence and support for reciprocal knowledge spillovers between the services. While listed and private family firms do not differ in regard to the proportion of NAS fees, comparative findings suggest that key threats and benefits of jointly provided services are more prevalent among private than among listed family firms.Research limitations/implications - The study suffers from limited data availability and is restricted to the initial year of mandatory audit fee disclosure of private firms in Germany. Particularities of family firms and the German setting as well as differential results for listed and private family firms suggest fruitful avenues for future research.Practical implications - The study addresses current issues in audit regulation. Regulatory bodies should consider that key threats and benefits of auditor-provided NAS decrease with stronger exogenous restrictions. Attempts to restrict jointly provided services in the EU suggest family firms to reconsider their reliance on auditors as a trusted source of NAS.Originality/value - This study is the first to provide evidence on the extent and consequences of auditor-provided NAS in family firms based on fee disclosure. It is also among the few studies that investigate private firms in a code law country and complements prior evidence from Germany that is restricted to listed firms. More generally, it contributes to limited evidence at the intersection of audit and family business research.

Download or read book Demand for Audit Quality in Small Private Firms written by Mervi Niskanen and published by . This book was released on 2009 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the interaction between audit quality and agency costs, when managerial ownership is used as a proxy for agency costs. The literature on audit quality suggests that firms with high agency costs are more likely to demand audit quality. Our database enables us to compare the demand for audit quality with two different measures; demand for Big 4 auditors and certified auditors with strict professional requirements. The results show that an increase in managerial ownership decreases the likelihood that the firm will engage a Big 4 auditor but it does not have an impact on the demand for certified auditors. Our findings also support previous studies that suggest a nonlinear connection between managerial ownership and demand for audit quality in terms of Big 4 audits. This suggests that audits by Big 4 audit firms are used in informationally opaque private firms to overcome agency costs. We also find that the probability of choosing a Big 4 auditor increases with an increase in firm size and the presence of foreign sales. An increase in leverage increases the likelihood that the firm will engage a Big 4 auditor only in the larger firms and in firms, in which management ownership is above 50%.

Download or read book Non Audit Service Fees and Audit Quality written by Chee Yeow Lim and published by . This book was released on 2013 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent studies on whether the provision of non-audit services impairs audit quality document mixed results, depending on the proxy for auditor quality used. We posit that the effect of non-audit fees on audit quality is conditional on auditor industry specialization in that audit quality is less likely to be impaired in the case of industry specialist auditors providing non-audit services. Our premise is that industry specialist auditors are more likely to be concerned about reputation losses and litigation exposure, and to benefit from knowledge spillovers from the provision of non-audit services. We find some evidence that audit quality (as measured by increased propensity to issue going-concern opinion, increased propensity to miss analysts' forecasts, as well as higher earnings-response coefficients) is less likely to be reduced for firms that acquire non-audit services from industry specialist auditors compared to non-specialist auditors. Implications are discussed.

Download or read book Does the Performance of Non Audit Services by Auditors Impair Independence Evidence from Firms Post Service Performance written by Thomas Lau and published by . This book was released on 2009 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether the provision of non-audit services by a firm's own auditors provides value to the firm. We examine the future return on assets and sales growth as a function of the expenditures by the client firms on non-audit services, reasoning that if such payments are intended primarily to impair auditor independence, no association with future firm performance should be detected. Our findings show that, in fact, the payments to auditors for non-audit services are positively related to the one-period ahead sales growth. We interpret these findings as suggesting that firms do obtain value for their expenditures on non-audit services provided by their auditors. Thus, even if auditor independence is compromised by such hiring, the value obtained by the client firms for their non-audit services may justify their hiring.

Download or read book Non audit Services and Financial Reporting Quality written by Kevin Koh and published by . This book was released on 2011 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide evidence on the long standing concern on auditor conflicts of interest from providing non-audit services (NAS) to audit clients by using rarely explored NAS fee data from 1978-80. Using this earlier setting, we find cross-sectional evidence of improved earnings quality when auditors provide NAS, especially those related to information services. This is consistent with better audit quality from knowledge spillovers due to the joint offering of audit and consulting services. Events related to the repeal of these NAS disclosures in 1982 are associated with a small positive stock price reaction suggesting no adverse economic consequences of withdrawing NAS disclosures. Further, following the repeal of disclosure requirements we find no change in the earnings quality of client firms. In sum, data drawn from an earlier time period suggest that auditors' reputational incentives, possible synergies and knowledge transfers imply that NAS offered by audit firms can be associated with improved audit and reporting quality in client firms.

Download or read book Taxing Corporate Income in the 21st Century written by Alan J. Auerbach and published by Cambridge University Press. This book was released on 2007-04-16 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book was first published in 2007. Most countries levy taxes on corporations, but the impact - and therefore the wisdom - of such taxes is highly controversial among economists. Does the burden of these taxes fall on wealthy shareowners, or is it passed along to those who work for, or buy the products of, corporations? Can a country with high corporate taxes remain competitive in the global economy? This book features research by leading economists and accountants that sheds light on these and related questions, including how taxes affect corporate dividend policy, stock market value, avoidance, and evasion. The studies promise to inform both future tax policy and regulatory policy, especially in light of the Sarbanes-Oxley Act and other actions by the Securities and Exchange Commission that are having profound effects on the market for tax planning and auditing in the wake of the well-publicized accounting scandals in Enron and WorldCom.

Download or read book The Association Between Audit Firm Characteristics and Audit Quality written by Bahaaeddin Alareeni and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses Meta-Analysis technique to a set of previous empirical studies to investigate the relation between audit firm characteristics (e.g. audit fees, audit firm size, non-audit services, auditor-client tenure) and audit quality. Hunter et al. (1982) test is used as the Meta-Analysis technique for this study. A total of 51 published papers are gathered from 1992 to 2016. The findings show that there is a significant positive relationship between auditor-client tenure, audit fees and audit quality, whereas non-audit services and audit firm size have a significant negative relationship with the audit quality.