Non-audit fees, long-term auditor-client relationships and earnings management

Steven Cahan, David Emanuel, David Hay and Norman Wong

Accounting and Finance, 2008, vol. 48, issue 2, pages 181-207

Abstract: We examine whether auditor independence is affected by the amount spent on non-audit services. Faster growth in non-audit fees and longer time periods over which non-audit services are purchased might reduce the auditor's independence from that client. Our results do not provide any support for a relationship between non-audit fee growth rates or the length of time of the non-audit fee relationship with the client and discretionary accruals, our measure of earnings management. We do find some evidence that the interaction of the non-audit fee time-period measures and client importance is positive and significantly related to discretionary accruals. Copyright (c) 2007 The Authors. Journal compilation (c) 2007 AFAANZ.

Date: 2008

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