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Audit and non-audit fees and capital market perceptions of auditor independence

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  • Ghosh, Aloke (Al)
  • Kallapur, Sanjay
  • Moon, Doocheol
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    Abstract

    This study provides evidence on whether auditor independence-in-appearance, proxied by earnings response coefficients, is related to the non-audit fee ratio (non-audit to total fees from a client) or client importance (total fees from a client as a percentage of the total revenues of the audit firm). The results from large samples over the period 2001-2006 show, contrary to popular belief and the findings of some prior studies, that there is no evidence of a relation between perceived auditor independence and the non-audit fee ratio. However, perceived auditor independence is negatively associated with client importance, consistent with the economic theory of auditing. Our paper adds to the literature by examining the relative importance of non-audit fee ratios and client importance as determinants of independence-in-appearance.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Accounting and Public Policy.

    Volume (Year): 28 (2009)
    Issue (Month): 5 (September)
    Pages: 369-385

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    Handle: RePEc:eee:jappol:v:28:y:2009:i:5:p:369-385

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    Web page: http://www.elsevier.com/locate/jaccpubpol

    Related research

    Keywords: Audit fees Non-audit fees Independence-in-appearance Earnings response coefficients Non-audit fee ratio Client importance;

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    Cited by:
    1. Seyed Mahmoud Hosseinniakani & Helena Inacio & Rui Mota, 2014. "A Review on Audit Quality Factors," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 243-254, April.

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