Auditor Fees and Auditor Independence: Evidence from Going Concern Reporting Decisions
Marshall A. Geiger
University of Richmond - E. Claiborne Robins School of Business - Economics
Allen D. Blay
Florida State University
October 12, 2011
In this study we examine the association between audit service fees and non-audit service (NAS) fees and the auditor’s final decision regarding the type of opinion to render to a financially distressed client. Along with examining current fee levels and reporting decisions we also test the DeAngelo (1981) auditor independence model by examining the association between future fee receipts and current reporting decisions. Using data from the post-SOX reporting period of 2004-2006 and a stringent control sample, we find that the magnitude of NAS fees received in the current year is negatively related to the likelihood of the auditor modifying the audit opinion for going-concern uncertainty. We also find that current going-concern modification decisions are negatively related to total fees received by auditors in subsequent years. Our findings suggest that concerns over the relation between auditor fees and the possible impairment of auditor independence, as reflected in going-concern modification decisions, are supported in the more recent years for highly distressed clients.
Number of Pages in PDF File: 53
Keywords: going-concern, auditor reporting, auditor independence, NAS fees
JEL Classification: M4working papers series
Date posted: October 13, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo2 in 0.672 seconds