Evidence on the Joint Determination of Audit and Non-Audit Services
31 Pages Posted: 23 Apr 2002 Last revised: 3 Jun 2016
Date Written: September 1, 2002
Abstract
In this study, we investigate whether the characteristics of clients, auditors, and the auditor-client relationship jointly determine audit and non-audit services. As done in prior studies, we maintain that fees proxy for the level of service provided and follow the physical flow of knowledge. Our results show that audit and non-audit fees are endogenous. More important, we find that inferences are different on the relation between audit and non-audit fees after we consider the simultaneity of audit and non-audit services compared with those inferences from single-equation estimations. Estimating the system of fee equations simultaneously, we find that provision of audit and non-audit services leads to no relation with audit fees, which suggests that single-equation estimations suffer from simultaneous-equations bias. Further, the finding suggests that there is either no knowledge spillover occur or equal knowledge spillover exist between audit and non-audit services.
Keywords: audit pricing, non-audit pricing, economies of scope, joint provision of services
JEL Classification: M41, M49, Ll5
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Relation between Auditors' Fees for Non-Audit Services and Earnings Management
By Richard M. Frankel, Marilyn F. Johnson, ...
-
Do Non-Audit Service Fees Impair Auditor Independence? Evidence from Going-Concern Audit Opinions
By Mark L. Defond, Kannan Raghunandan, ...
-
By Rick Antle, Paul A. Griffin, ...
-
The Joint Determination of Audit Fees, Non-Audit Fees, And Abnormal Accruals
By Rick Antle, Elizabeth A. Gordon, ...
-
The Jointness of Audit Fees and Demand for MAS: A Self-Selection Analysis
-
Engagement Planning, Bid Pricing, and Client Response in the Market for Initial Attest Engagements
By Karla M. Zehms and Jean C. Bedard
-
Disclosure of Fees Paid to Auditors and the Market Valuation of Earnings Surprises
By Jere R. Francis and Bin Ke
-
Non-Audit Services and Earnings Conservatism: Is Auditor Independence Impaired?
By Caitlin M. S. Ruddock, Sarah J. Taylor, ...
-
Non-Audit Service Fees and Audit Quality: The Impact of Auditor Specialization
By Chee Yeow Lim and Hun-tong Tan