Abstract

http://ssrn.com/abstract=1677166
 
 

References (44)



 


 



Non-Audit Services and Earnings Management in the Pre-SOX and Post-SOX Eras


Jayanthi Krishnan


Temple University - Department of Accounting

Lixin (Nancy) Su


Hong Kong Polytechnic University - School of Accounting and Finance

Yinqi Zhang


American University

August 5, 2010

Auditing: A Journal of Practice & Theory, Vol. 30, No. 3, 2011

Abstract:     
Concerns about the impact of auditor-provided non-audit services (NAS) on auditor independence arise because of (1) auditors’ economic dependence on their clients and (2) some specific types of NAS which the SEC argues can harm auditor objectivity. The SEC’s prohibition in 2003 of specific kinds of NAS led to a significant decline in NAS between 2000-2001 and 2004-2005. We argue that this decline in observed NAS fees can be used to identify firms that had a greater likelihood of impaired auditor independence in the pre-SOX period. Using discretionary accruals to proxy for earnings management, we find a positive association between discretionary accruals in the pre-SOX era and the subsequent reduction in NAS, but this was confined to income-decreasing accruals. Further, the association between downwards earnings management and the decline in NAS was reduced in the post-SOX era.

Number of Pages in PDF File: 37

Keywords: Non-Audit Services, Earnings Management, Sarbanes-Oxley Act

JEL Classification: M41, M49, G12, L84

Accepted Paper Series


Download This Paper

Date posted: May 18, 2011 ; Last revised: April 21, 2014

Suggested Citation

Krishnan, Jayanthi and Su, Lixin (Nancy) and Zhang, Yinqi, Non-Audit Services and Earnings Management in the Pre-SOX and Post-SOX Eras (August 5, 2010). Auditing: A Journal of Practice & Theory, Vol. 30, No. 3, 2011. Available at SSRN: http://ssrn.com/abstract=1677166 or http://dx.doi.org/10.2139/ssrn.1677166

Contact Information

Jayanthi Krishnan (Contact Author)
Temple University - Department of Accounting ( email )
Philadelphia, PA 19122
United States
215-204-3085 (Phone)

Lixin (Nancy) Su
Hong Kong Polytechnic University - School of Accounting and Finance ( email )
Hung Hom, Kowloon
Hong Kong
852-2766-7033 (Phone)
852-2330-9845 (Fax)
Yinqi Zhang
American University ( email )
4400 Massachusetts Ave NW
Washington, DC 20016
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,066
Downloads: 254
Download Rank: 68,706
References:  44

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.610 seconds