Do Non-Audit Services Compromise Auditor Independence? Further Evidence

Unversity of Wisconsin Working paper

47 Pages Posted: 18 Apr 2002

See all articles by Hollis Ashbaugh Skaife

Hollis Ashbaugh Skaife

Graduate School of Management, UC-Davis

Ryan LaFond

Algert Global, LLC

Brian W. Mayhew

University of Wisconsin - Madison - Department of Accounting and Information Systems

Date Written: February 20, 2003

Abstract

This paper challenges the findings of Frankel, Johnson and Nelson (FJN) (2002). The results of our discretionary accruals tests differ from FJN's when we adjust discretionary current accruals for firm performance. In our earnings benchmark tests, in contrast to FJN we find no statistically significant association between firms meeting analyst forecasts and auditor fees. Our market reaction tests also provide different results than those reported by FJN. Overall, our study indicates that FJN's results are sensitive to research design choices, and we find no systematic evidence supporting their claim that auditors violate their independence as a result of clients purchasing relatively more nonaudit services.

Keywords: independence, audit fees, discretionary accruals, biased financial reporting

JEL Classification: M41, M43, M49

Suggested Citation

Skaife, Hollis Ashbaugh and LaFond, Ryan and Mayhew, Brian W., Do Non-Audit Services Compromise Auditor Independence? Further Evidence (February 20, 2003). Unversity of Wisconsin Working paper, Available at SSRN: https://ssrn.com/abstract=305720 or http://dx.doi.org/10.2139/ssrn.305720

Hollis Ashbaugh Skaife

Graduate School of Management, UC-Davis ( email )

Graduate School of Management
1 Shields Ave
Davis, CA 95616
United States

Ryan LaFond

Algert Global, LLC ( email )

One Maritime Plaza
Suite 1525
San Francisco, CA 94111
United States

Brian W. Mayhew (Contact Author)

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States
608-262-2714 (Phone)
608-263-0477 (Fax)

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