Non-Audit Service Fees and Audit Quality: The Impact of Auditor Specialization

Posted: 22 Oct 2007

See all articles by Hun-Tong Tan

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University

Abstract

We posit that the effect of non-audit fees on audit quality is conditional on auditor industry specialization. Industry specialist auditors are more likely than non-specialists to be concerned about reputation losses and litigation exposure, and to benefit from knowledge spillovers from the provision of non-audit services. We find evidence that audit quality measured by increased propensity to issue going-concern opinion, increased propensity to miss analysts' forecasts, as well as higher earnings-response coefficients increases with the level of non-audit services acquired from industry specialist auditors compared to non-specialist auditors.

Keywords: non-audit fees, auditor specialization, audit quality

JEL Classification: M49, G29, L84

Suggested Citation

Tan, Hun-Tong, Non-Audit Service Fees and Audit Quality: The Impact of Auditor Specialization. Journal of Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1023521

Hun-Tong Tan (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
+65 6790 4819 (Phone)
+65 6793 7956 (Fax)

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