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Non-audit fees, disclosure and audit quality

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  • Clive Lennox
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    Abstract

    This paper investigates the effect of non-audit services on audit quality. Following the announcement of the requirement to disclose non-audit fees, approximately one-third of UK quoted companies disclosed before the requirement became effective. Whilst distressed companies were more likely to disclose early, auditor size, directors' shareholdings and non-audit fees were not significantly correlated with early disclosure. These results cast doubt on the view that voluntary disclosure of non-audit fees was used to signal audit quality. The evidence also indicates a positive weakly significant relationship between disclosed non-audit fees and audit qualifications. This suggests that when non-audit fees are disclosed, the provision of non-audit services does not reduce audit quality.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/096381899336014
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal European Accounting Review.

    Volume (Year): 8 (1999)
    Issue (Month): 2 ()
    Pages: 239-252

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    Handle: RePEc:taf:euract:v:8:y:1999:i:2:p:239-252

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Clive S. Lennox, 1999. "The Accuracy and Incremental Information Content of Audit Reports in Predicting Bankruptcy," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(5&6), pages 757-778.
    2. Krishnan, Jagan & Stephens, Ray G., 1995. "Evidence on opinion shopping from audit opinion conservatism," Journal of Accounting and Public Policy, Elsevier, vol. 14(3), pages 179-201.
    3. DeAngelo, Linda Elizabeth, 1981. "Auditor size and audit quality," Journal of Accounting and Economics, Elsevier, vol. 3(3), pages 183-199, December.
    4. Daron Acemoglu & Miles Gietzmann, 1998. "Auditor independence, incomplete contracts and the role of legal liability," European Accounting Review, Taylor & Francis Journals, vol. 6(3), pages 355-375.
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    Cited by:
    1. Lennox, Clive, 2000. "Do companies successfully engage in opinion-shopping? Evidence from the UK," Journal of Accounting and Economics, Elsevier, vol. 29(3), pages 321-337, June.

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