An Assessment of the Provisions of Regulation (EU) No 537/2014 on Non-audit Services and Audit Firm Tenure: Evidence from Spain

Josep Garcia-Blandon, Josep Maria Argiles-Bosch, David Castillo-Merino and Monica Martinez-Blasco ()

The International Journal of Accounting, 2017, vol. 52, issue 3, 251-261

Abstract: On May 27, 2014, Regulation (EU) No 537/2014 was published in the Official Journal of the European Union. Aiming to enhance audit quality, the new regulation establishes important limitations to the selling of non-audit services by the audit firm to audit clients and a maximum tenure of ten years with the audit firm. However, it should be noted that the extant research has not consistently supported that non-audit services or long tenures impair the quality of audits. This research studies whether these provisions have been empirically associated with reduced audit quality for Spain. Because of its low litigation risk, the potentially negative impact of both non-audit services and tenure on audit quality should be clearly observed in the Spanish audit market. Nevertheless, we do not find significantly lower levels of audit quality associated with either non-audit services or long audit tenures. However, these results are conditional on the validity of using abnormal accruals to measure audit quality.

Keywords: Audit firm tenure; Non-audit services; Audit quality (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:52:y:2017:i:3:p:251-261

DOI: 10.1016/j.intacc.2017.07.003

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