The Provision of Non-Audit Services by Auditors: Let the Market Evolve and Decide
International Review of Law and Economics, 1999, 19(4), 513-31
27 Pages Posted: 19 Jun 2000 Last revised: 22 Jul 2018
Date Written: January 1, 1999
The provision of non-audit services by auditors to their audit clients reduces total costs, increases technical competence and motivates more intense competition. Furthermore, these services do not necessarily damage auditor independence nor the quality of non-audit services. This assessment leads to recommending that legislative policy should aim at facilitating the development and use of the safeguards provided by the free action of market forces. Regulation should thus aim to enable the parties-audit firms, self- regulatory bodies and audit clients-to discover through competitive market interaction both the most efficient mix of services and the corresponding quality safeguards, adjusting for the costs and benefits of each possibility. Particular emphasis is placed on the role played by fee income diversification and the enhancement, through disclosure rules, of market incentives to diversify.
Keywords: Auditing; Professional services; Non-audit services; Multidisciplinary firms
JEL Classification: K22, K23, M40, M49
Suggested Citation: Suggested Citation