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


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


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.

Suggested Citation

  • Ghosh, Aloke (Al) & Kallapur, Sanjay & Moon, Doocheol, 2009. "Audit and non-audit fees and capital market perceptions of auditor independence," Journal of Accounting and Public Policy, Elsevier, vol. 28(5), pages 369-385, September.
  • Handle: RePEc:eee:jappol:v:28:y:2009:i:5:p:369-385

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    Cited by:

    1. Sharad Asthana, 2013. "Diversification By The Audit Office And Its Impact On Audit Quality," Working Papers 0152acc, College of Business, University of Texas at San Antonio.
    2. repec:eee:jiaata:v:23:y:2014:i:1:p:44-57 is not listed on IDEAS
    3. Giuseppe Ianniello, 2015. "The effects of board and auditor independence on earnings quality: evidence from Italy," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(1), pages 229-253, February.
    4. Domenico Campa & Ray Donnelly, 2016. "Non-audit services provided to audit clients, independence of mind and independence in appearance: latest evidence from large UK listed companies," Accounting and Business Research, Taylor & Francis Journals, vol. 46(4), pages 422-449, June.
    5. 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.
    6. repec:taf:oabmxx:v:3:y:2016:i:1:p:1215223 is not listed on IDEAS
    7. Zhang, Xiaoxiang & Wen, Jie, 2016. "The impacts of economic importance difference of a joint venture (JV) held by partners and partners' size difference on the extraction of rivalrous and non-rivalrous private benefits in a JV," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 46-54.


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