The Effect of Pure Audit Firms, Non-Provision of Non-Audit Services to Audit Clients, and a Statutory Fee Schedule on Audit Quality Perceptions

49 Pages Posted: 2 Aug 2021 Last revised: 9 Nov 2021

See all articles by Nicolas Pappert

Nicolas Pappert

Technical University of Darmstadt

Reiner Quick

Technical University of Darmstadt

Date Written: November 8, 2021

Abstract

An ongoing debate among accounting academics and regulators revolves around instruments for strengthening the audit quality perceptions of financial statements users. Despite constant regulatory change, the occurrence of accounting scandals (e.g., recently Carillion in the U.K. or Wirecard in Germany) has reignited public allegations that the existing regulation is insufficient. Therefore, this study investigates two measures that lack empirical evidence but could theoretically improve perceived audit quality. These are a full ban of NAS (either by requiring pure audit firms, or a voluntary decision not to provide NAS to audit clients) and a statutory fee schedule. We conduct an experiment with bankers and non-professional investors in Germany. The results indicate a positive main effect of pure audit firms and the non-provision of NAS to audit clients on perceived audit quality and auditor independence; but not on perceived auditor competence. Furthermore, we find a positive main effect of a statutory fee schedule on audit quality, auditor independence, and auditor competence perceptions.

Keywords: pure audit firms, audit services, non-audit services, audit fees, fee schedule, perceived audit quality, perceived auditor independence, perceived auditor competence

JEL Classification: M42, M48

Suggested Citation

Pappert, Nicolas and Quick, Reiner, The Effect of Pure Audit Firms, Non-Provision of Non-Audit Services to Audit Clients, and a Statutory Fee Schedule on Audit Quality Perceptions (November 8, 2021). Available at SSRN: https://ssrn.com/abstract=3896379 or http://dx.doi.org/10.2139/ssrn.3896379

Nicolas Pappert (Contact Author)

Technical University of Darmstadt ( email )

Hochschulstra├če 1
BWL 4
Darmstadt, 64289
Germany

Reiner Quick

Technical University of Darmstadt ( email )

Hochschulstra├če 1
Darmstadt, 64289
Germany

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