Non-Audit Fees, Long-Term Auditorclient Relationships and Earnings Management

27 Pages Posted: 13 May 2008

See all articles by Steven F. Cahan

Steven F. Cahan

University of Auckland Business School

David M. Emanuel

University of Auckland - Department of Accounting and Finance

David Hay

University of Auckland - Business School

Norman Wong

University of Auckland Business School

Date Written: 2007-08-22

Abstract

We examine whether auditor independence is affected by the amount spent on non-audit services. Faster growth in non-audit fees and longer time periods over which non-audit services are purchased might reduce the auditor's independence from that client. Our results do not provide any support for a relationship between non-audit fee growth rates or the length of time of the non-audit fee relationship with the client and discretionary accruals, our measure of earnings management. We do find some evidence that the interaction of the non-audit fee time-period measures and client importance is positive and significantly related to discretionary accruals.

Suggested Citation

Cahan, Steven F. and Emanuel, David M. and Hay, David and Wong, Norman, Non-Audit Fees, Long-Term Auditorclient Relationships and Earnings Management (2007-08-22). Accounting & Finance, Vol. 48, Issue 2, pp. 181-207, June 2008, Available at SSRN: https://ssrn.com/abstract=1131470 or http://dx.doi.org/10.1111/j.1467-629X.2008.00251.x

Steven F. Cahan (Contact Author)

University of Auckland Business School ( email )

Faculty of Business & Economics
Private Bag 92019
Auckland
New Zealand

David M. Emanuel

University of Auckland - Department of Accounting and Finance ( email )

Private Bag 92019
Auckland 1001
New Zealand

David Hay

University of Auckland - Business School ( email )

12 Grafton Rd
Auckland, 1010
New Zealand

Norman Wong

University of Auckland Business School ( email )

Private Bag 92019
Auckland, 1001
New Zealand
(64 9) 3737599 Ext. 87098 (Phone)
(64 9) 373 7406 (Fax)

HOME PAGE: http://www.business.auckland.ac.nz

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