Non‐audit Service Fees and Audit Quality: The Impact of Auditor Specialization

Non‐audit Service Fees and Audit Quality: The Impact of Auditor Specialization ABSTRACT We posit that the effect of non‐audit fees on audit quality is conditional on auditor industry specialization. Industry specialist auditors are more likely than nonspecialists to be concerned about reputation losses and litigation exposure, and to benefit from knowledge spillovers from the provision of non‐audit services. We find evidence that audit quality measured by increased propensity to issue going‐concern opinion, increased propensity to miss analysts' forecasts, as well as higher earnings‐response coefficients increases with the level of non‐audit services acquired from industry specialist auditors compared to nonspecialist auditors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Research Wiley

Non‐audit Service Fees and Audit Quality: The Impact of Auditor Specialization

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Publisher
Wiley Subscription Services, Inc., A Wiley Company
Copyright
Copyright © 2008 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0021-8456
eISSN
1475-679X
D.O.I.
10.1111/j.1475-679X.2007.00266.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT We posit that the effect of non‐audit fees on audit quality is conditional on auditor industry specialization. Industry specialist auditors are more likely than nonspecialists to be concerned about reputation losses and litigation exposure, and to benefit from knowledge spillovers from the provision of non‐audit services. We find evidence that audit quality measured by increased propensity to issue going‐concern opinion, increased propensity to miss analysts' forecasts, as well as higher earnings‐response coefficients increases with the level of non‐audit services acquired from industry specialist auditors compared to nonspecialist auditors.

Journal

Journal of Accounting ResearchWiley

Published: Mar 1, 2008

References

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