The Relation Between Auditors Fees For Non Audit Services And Earnings Quality
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The Relation Between Auditors Fees For Non Audit Services And Earnings Quality
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Author : Richard M. Frankel
language : en
Publisher:
Release Date : 2002
The Relation Between Auditors Fees For Non Audit Services And Earnings Quality written by Richard M. Frankel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Auditing categories.
We examine the association between the provision of non-audit services and earnings quality. Because of concerns regarding the effect of non-audit services on financial reporting credibility, the Securities and Exchange Commission recently issued revised auditor independence rules requiring firms to disclose in their annual proxy statement the amount of fees paid to auditors for audit and non-audit services. Using data collected from proxy statements filed between February 5, 2001 and June 15, 2001, we present evidence that firms purchasing more non-audit services from their auditor are more likely to just meet or beat analysts' forecasts and to report larger absolute discretionary accruals. However, the purchase of non-audit services is not associated with meeting other earnings benchmarks. We also find that the unexpected component of the non-audit to total fee ratio is negatively associated with stock returns on the filing date. These results are consistent with arguments that the provision of non-audit services strengthens an auditor's economic bond with the client and that investors price this effect. Keywords: Auditor independence; Auditor fees; Earnings management; Discretionary accruals. JEL Classification: G12, M41, M43, M49, L84.
The Relation Between Auditors Fees For Non Audit Services And Earnings Quality Classic Reprint
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Author : Richard M. Frankel
language : en
Publisher: Forgotten Books
Release Date : 2018-03-03
The Relation Between Auditors Fees For Non Audit Services And Earnings Quality Classic Reprint written by Richard M. Frankel and has been published by Forgotten Books this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-03-03 with Business & Economics categories.
Excerpt from The Relation Between Auditors' Fees for Non-Audit Services and Earnings Quality This paper provides empirical evidence on the relation between non-audit services and earnings quality. We test hypotheses concerning: (1) the association between a firm's purchase of non-audit services from its auditor and earnings management, and (2) the stock price reaction to the disclosure of non-audit fees. In the past decade there has been a dramatic increase in the proportion of fee revenue auditors derive from non-audit services, yet we know little about how non-audit services are related to earnings quality.1 Concern about the effect of non-audit services on the financial reporting process was a primary motivation for the Securities and Exchange Commission (sec) to issue revised auditor independence rules on November 15, 2000. The rules require firms to disclose the amount of all audit and non-audit fees paid to its auditor. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
The Relation Between Auditors Fees For Non Audit Services And Earnings Quality
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Author : Frankel Richard M
language : en
Publisher:
Release Date : 2023-07-18
The Relation Between Auditors Fees For Non Audit Services And Earnings Quality written by Frankel Richard M and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-07-18 with Business & Economics categories.
The Relation Between Auditors Fees For Non Audit Services And Earnings Management
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Author : Richard M. Frankel
language : en
Publisher:
Release Date : 2003
The Relation Between Auditors Fees For Non Audit Services And Earnings Management written by Richard M. Frankel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.
This paper examines whether auditor fees are associated with earnings management and the market reaction to the disclosure of auditor fees. Using data collected from proxy statements, we present evidence that non-audit fees are positively associated with small positive earnings surprises, the magnitude of absolute discretionary accruals, and the magnitude of income-increasing and income-decreasing discretionary accruals. In contrast, audit fees are negatively associated with these earnings management indicators. These results are robust to a variety of alternative variable definitions and model specifications. Specifically, contrary to the claims of Ashbaugh et al. (2002), the results are robust to the use of performance-matched discretionary accruals. Moreover, contrary to the claims of Francis and Ke (2002), the results for small positive earnings surprises are robust regardless of whether the comparison group is all other earnings surprises or small negative earnings surprises. Our final set of results provide evidence of a significant negative association between non-audit fees and share values on the date the fees were disclosed, although the effect is small in economic terms.
The Relation Between Auditors Fees For Non Audit Services And Earnings Quality Primary Source Edition
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Author : Frankel M
language : en
Publisher: Nabu Press
Release Date : 2014-02
The Relation Between Auditors Fees For Non Audit Services And Earnings Quality Primary Source Edition written by Frankel M and has been published by Nabu Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-02 with categories.
This is a reproduction of a book published before 1923. This book may have occasional imperfections such as missing or blurred pages, poor pictures, errant marks, etc. that were either part of the original artifact, or were introduced by the scanning process. We believe this work is culturally important, and despite the imperfections, have elected to bring it back into print as part of our continuing commitment to the preservation of printed works worldwide. We appreciate your understanding of the imperfections in the preservation process, and hope you enjoy this valuable book.
Audit Fees Non Audit Services And Auditor Client Economic Bonding
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Author : Jeffrey Coulton
language : en
Publisher:
Release Date : 2007
Audit Fees Non Audit Services And Auditor Client Economic Bonding written by Jeffrey Coulton and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
We investigate whether auditor independence is compromised by either the mix of audit and non audit services (NAS), or simply unusually large NAS or audit fees. The results help reconcile apparently conflicting evidence in prior studies linking NAS and indicators of earnings management, as well as providing new insights on the relation between the incentive structures faced by auditors and variation in audit quality. Using the unexpected accrual component of earnings as a proxy for the effect of impaired auditor independence, we initially find that client firms purchasing an unexpectedly large NAS fee mix (i.e., relative to audit fees) display some evidence of aggressive accounting. However, when we explicitly allow for the possibly endogenous nature of unexpected accruals and unexpected NAS, this result no longer holds. In contrast, similar evidence of a positive relation between the magnitude of unexpectedly large audit fees and positive unexpected accruals still occurs (albeit more weakly) after explicitly allowing for possible endogeneity. A significant positive association between unexpected total fees (audit plus NAS) and the magnitude of positive unexpected accruals is even more robust. However, further tests shows that these quot;resultquot; are confined to clients of Non-Big 6 auditors. We therefore conclude that for large audit firms, the incentive to protect larger than expected fees is outweighed by the importance of their reputation for providing high quality audits relative to smaller audit firms. The results also highlight how sensitive conclusions about possible quot;NAS effectsquot; are to the choice of proxy for economic bond as well as the precise experimental design.
Audit And Non Audit Service Provision
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Author : Sylvia Chai
language : en
Publisher:
Release Date : 2000
Audit And Non Audit Service Provision written by Sylvia Chai and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Auditing categories.
This study investigates whether auditors compromise their independence when they provide audit and non-audit services jointly to their clients. The relationship between the level of non-audit services fees and two independence-related measures: (i) the level of earnings management and (ii) the type of audit opinion issued, is examined. The results indicate that for Big 6 audited companies purchasing higher levels of non-audit services engage in higher levels of earnings management compared to companies purchasing a lower level of non-audit services from their incumbent auditor. However, the study finds that high level purchasers of non-audit services are not more likely to receive a clean opinion compared to low level purchasers of non-audit services. In order to explain the conflicting results, further tests are conducted to determine whether companies that purchase concurrently a high level of non-audit services and indulge in high levels of earnings management are more likely to receive a clean audit opinion. This is important since auditors will only be perceived as compromising their independence if they fail to issue qualifications when the level of earnings management is high. The findings indicate that no relationship exists between the type of audit opinion issued and the interaction between the level of non-audit service fees and the level of earnings management. Hence, it is concluded that auditors do not impair their independence in terms of willingness to issue deserved qualifications when providing joint services.00000 g.
Non Audit Service Fees And Audit Quality
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Author : Chee Yeow Lim
language : en
Publisher:
Release Date : 2013
Non Audit Service Fees And Audit Quality written by Chee Yeow Lim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Recent studies on whether the provision of non-audit services impairs audit quality document mixed results, depending on the proxy for auditor quality used. We posit that the effect of non-audit fees on audit quality is conditional on auditor industry specialization in that audit quality is less likely to be impaired in the case of industry specialist auditors providing non-audit services. Our premise is that industry specialist auditors are more likely to be concerned about reputation losses and litigation exposure, and to benefit from knowledge spillovers from the provision of non-audit services. We find some evidence that audit quality (as measured by increased propensity to issue going-concern opinion, increased propensity to miss analysts' forecasts, as well as higher earnings-response coefficients) is less likely to be reduced for firms that acquire non-audit services from industry specialist auditors compared to non-specialist auditors. Implications are discussed.
Auditing
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Author :
language : en
Publisher:
Release Date : 2006
Auditing written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Auditing categories.
Non Audit Services Auditor Quality And The Value Relevance Of Earnings
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Author : Ferdinand A. Gul
language : en
Publisher:
Release Date : 2006
Non Audit Services Auditor Quality And The Value Relevance Of Earnings written by Ferdinand A. Gul and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
This paper tests the hypothesis that there is an inverse relation between non-audit services (NAS) provided by a firm auditor and the value relevance of earnings (measured as the earnings response coefficient) and that this relation is weaker for firms with Big 6 auditors. The hypothesis is based on anecdotal evidence and prior research which suggest that the provision of NAS by the external auditor is likely to adversely affect investors' perceptions of the credibility of financial reports and that Big 6 auditors due to reputational capital and litigation costs are likely to mitigate the adverse effects of NAS. Results using 840 firm-year observations of Australian companies document a statistically significant inverse relationship between NAS and the value relevance of earnings and that this inverse relationship is weaker for Big 6 auditors, thus supporting the hypothesis.