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

Aloke (Al) Ghosh, Sanjay Kallapur, Doocheol Moon

Research output: Contribution to journalArticle

55 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)369-385
Number of pages17
JournalJournal of Accounting and Public Policy
Volume28
Issue number5
DOIs
Publication statusPublished - 2009 Sep 1

All Science Journal Classification (ASJC) codes

  • Accounting
  • Sociology and Political Science

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