The provision on non-audit services by auditors: Let the market evolve and decide
AbstractThe provision of non-audit services by auditors to their audit clients reduces total costs, increases technical competence and motivates more intense competition. Furthermore, these services do not necessarily damage auditor independence nor the quality of non-audit services. This assessment leads to recommending that legislative policy should aim at facilitating the development and use of the safeguards provided by the free action of market forces. Regulation should thus aim to enable the parties-audit firms, self- regulatory bodies and audit clients-to discover through competitive market interaction both the most efficient mix of services and the corresponding quality safeguards, adjusting for the costs and benefits of each possibility. Particular emphasis is placed on the role played by fee income diversification and the enhancement, through disclosure rules, of market incentives to diversify.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 423.
Date of creation: Jun 1999
Date of revision:
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Web page: http://www.econ.upf.edu/
Auditing; professional services; non-audit services; multidisciplinary firms;
Other versions of this item:
- Arrunada, Benito, 1999. "The provision of non-audit services by auditors let the market evolve and decide," International Review of Law and Economics, Elsevier, vol. 19(4), pages 513-531, December.
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
- M40 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-03-06 (All new papers)
- NEP-IND-2000-03-06 (Industrial Organization)
- NEP-LAW-2000-03-06 (Law & Economics)
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