Restricting Non-Audit Services in Europe – The Potential (Lack of) Impact of a Blacklist and a Fee Cap On Auditor Independence and Audit Quality

Accounting in Europe, a Journal of the European Accounting Association, Forthcoming

37 Pages Posted: 27 Mar 2015

Date Written: March 25, 2015

Abstract

The European audit reform aims to stabilize financial markets by enhancing trust in the statutory audit. To strengthen auditor independence and to increase audit quality the provision of non-audit services to audit clients is further restricted. The supranational introduction of a blacklist, including prohibited non-audit services, and of a cap on the volume of non-audit fees is a novelty on the European level. The purpose of this paper is threefold. First, we analyze these measures in light of both current national restrictions of non-audit services and auditor fee disclosure requirements in France, Germany and the United Kingdom. Second, we assess the potential impact of the cap on the volume of non-audit services by providing descriptive evidence on current fee levels in these three countries. Third, we critically assess the impact of the audit reform regarding non-audit services in light of audit research by analyzing the state-of-the-art. On this basis, we doubt whether the European reform of auditor-provided non-audit services is effective and efficient. The main goal of enhancing perceived auditor independence and, thus, public trust in audited financial statements of public-interest entities may be hardly achieved and the blacklist might present a tradeoff between auditor independence and audit quality.

Keywords: audit quality, auditor independence, audit market regulation, auditor remuneration, non-audit services

JEL Classification: M41

Suggested Citation

Ratzinger-Sakel, Nicole V.S. and Schoenberger, Martin, Restricting Non-Audit Services in Europe – The Potential (Lack of) Impact of a Blacklist and a Fee Cap On Auditor Independence and Audit Quality (March 25, 2015). Accounting in Europe, a Journal of the European Accounting Association, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2584987

Nicole V.S. Ratzinger-Sakel

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

Martin Schoenberger (Contact Author)

Ulm University

Ulm
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
364
Abstract Views
1,495
rank
85,752
PlumX Metrics