The Research On The Effects of Non-audit Service Fees and Engagement Risk on Auditor Independence
Date Issued
2004
Date
2004
Author(s)
Lu, Chian-Uen
DOI
zh-TW
Abstract
It has been a major concern whether auditor independence may be negatively impacted if auditors perform nonaudit services for their audit clients. However, the results of empirical researches are mixed. It could be caused by different research designs or lack of influential variables on auditor independence.
According to existing studies, engagement risks could restrain the possibility that auditors are willing to sacrifice independence. This study therefore extends existing NAS related empirical researches by combining nonaudit service fees variables with engagement risks. It empirically examines whether auditors’ are willing to sacrifice independence because of NAS fees, and if auditors would decide to maintain independence in accordance with engagement risks. Specifically, this study takes interactions between nonaudit service fees and engagement risks into consideration in order to examine if interactions significantly influence auditor independence.
The results show no significant association between the ratio of NAS fees to audit fees and the absolute value of abnormal accruals, indicating that higher the NAS fees do not necessarily lead to auditors’ more willing to allow earnings management. However, there is statistically significant association between engagement risks and the absolute value of abnormal accruals. Auditors hence tend to suppress clients’ earnings management when faced with higher engagement risks. Lastly, the most importance finding in this study is interactions between NAS fees and engagement risks have significant influence on the absolute value of abnormal accruals, indicating interactions significantly moderate the influence of NAS fees on auditor independence.
Subjects
非審計服務
獨立性
委任風險
Nonaudit service fees
Engagement risk
Auditor independence
Type
other
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