Do Nonaudit Services Compromise Auditor Independence? Further Evidence

Posted: 31 Mar 2003

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

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 Nonaudit Services Compromise Auditor Independence? Further Evidence. The Accounting Review, July 2003, Available at SSRN: https://ssrn.com/abstract=382440

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)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
2,365
PlumX Metrics