AUDITOR INDEPENDENCE, AUDIT FEES LOWBALLING, AND NON-AUDIT SERVICES: EVIDENCE FROM FIJI

Arvind Patel and Pranil Prasad

Accounting & Taxation, 2013, vol. 5, issue 2, 103-120

Abstract: This study empirically examines the supply side of the market for non-audit services. In particular, a model for the supply side of the market for non-audit services is developed. This model is then tested using audit and non-audit fee data from Fijian listed companies from the year 1980 to 2010. We find that audit fee low-balling leads to increased supply of non-audit services. This result is statistically significant. We also find that Big 4 auditors supply less non-audit services compared to non-Big 4 auditors. Finally, we find that the longer the auditor tenure the lower the supply of non-audit services. However, both these results are statistically insignificant. This leads to a conclusion that non-audit services are being supplied for opportunistic reasons as opposed to efficiency reasons. Our results are robust to a number of sensitivity checks.

Keywords: Auditor Independence; Audit Fees; Non-Audit Fees (search for similar items in EconPapers)
JEL-codes: M42 (search for similar items in EconPapers)
Date: 2013
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