Does Selling Non-Audit Services Impair Auditor Independence? New Research Says, 'Yes'
Current Issues in Auditing, Forthcoming
12 Pages Posted: 20 May 2015
Date Written: May 19, 2015
A recently published academic study by Causholli, Chambers, and Payne (2014) brings new evidence to a long-standing debate about whether the provision of non-audit services (NAS) can impair auditor independence. Prior research on this question has largely found no evidence of lower financial reporting quality when auditors provide high levels of NAS. By considering the potential that future NAS, rather than current NAS levels, could impair auditor independence, Causholli et al. bring a fresh perspective on the question. They argue that it is the potential for new NAS revenue that would most likely cause auditors to have impaired independence. They find strong evidence that audit quality suffers when clients are willing to purchase future NAS from their auditor.
Keywords: Non-audit service fees, audit quality, audit independence, earnings management
JEL Classification: M41, M42
Suggested Citation: Suggested Citation