Too Much of a Good Thing? Evidence of a Nonlinear Association Between Non-Audit Services and Audit Quality

39 Pages Posted: 9 Feb 2018 Last revised: 15 Jun 2022

See all articles by Erik Beardsley

Erik Beardsley

University of Illinois

Andy Imdieke

University of Notre Dame - Mendoza College of Business

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy

Date Written: June 6, 2022

Abstract

The effect of providing clients non-audit services (NAS) on audit quality remains relevant and important to regulators. Prior academic studies provide evidence of either positive or negative effects of NAS on audit quality via knowledge spillover and independence or distraction. This study complements existing research by examining whether the association between NAS and audit quality varies over the range of NAS provisions by the audit offices. Specifically, we predict and find a nonlinear (i.e., concave) association between office NAS provision and audit quality. Additional analysis reveals that the result is primarily related to auditor-provided tax services (APTS) rather than non-tax NAS. Overall, this study contributes to our understanding of the effect of NAS provision on audit quality over the distribution of NAS provision

Keywords: auditor independence; knowledge spillover; audit quality; non-audit services; auditor-provided tax services

Suggested Citation

Beardsley, Erik and Imdieke, Andy and Omer, Thomas C., Too Much of a Good Thing? Evidence of a Nonlinear Association Between Non-Audit Services and Audit Quality (June 6, 2022). Available at SSRN: https://ssrn.com/abstract=3114395 or http://dx.doi.org/10.2139/ssrn.3114395

Erik Beardsley (Contact Author)

University of Illinois ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Andy Imdieke

University of Notre Dame - Mendoza College of Business ( email )

Notre Dame, IN 46556-5646
United States

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

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