The Sarbanes-Oxley Act and Auditor Independence: Preliminary Evidence from Audit Opinion and Discretionary Accruals

29 Pages Posted: 28 Aug 2003

See all articles by Kam Wah Lai

Kam Wah Lai

Chu Hai College of Higher Education

Date Written: August 2003

Abstract

This paper examines whether the passing of the Sarbanes-Oxley Act is associated with enhanced auditor independence. Under the Act, most of the previous non-audit services provided by auditors are restricted. It is expected that by restricting the provision of such services by the incumbent auditors, auditor independence is enhanced. I report that financial statements with fiscal year end in August 2002 or thereafter are more likely to be associated with modified audit opinions and lower discretionary accruals. Hence, the Act is associated with enhanced auditor independence.

Keywords: Sarbanes-Oxley Act, auditor independence, modified opinion, discretionary accruals, non-audit services

JEL Classification: M49, M41, M43, G38

Suggested Citation

Lai, Kam Wah, The Sarbanes-Oxley Act and Auditor Independence: Preliminary Evidence from Audit Opinion and Discretionary Accruals (August 2003). Available at SSRN: https://ssrn.com/abstract=438280 or http://dx.doi.org/10.2139/ssrn.438280

Kam Wah Lai (Contact Author)

Chu Hai College of Higher Education ( email )