Journal Article10.1007/S11846-018-0306-Z
Non-audit services and audit quality: evidence from Germany
Daniela Hohenfels,Reiner Quick +1 more
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TL;DR: In this article, the impact of non-audit services (NAS) on audit quality is examined and the association between the level and type of NAS fees (NAS fees) paid to the auditor and audit quality are found.
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Abstract: The study examines the impact of non-audit services (NAS) on audit quality. It is motivated by the new re-strictions on the joint provision of audit and NAS for EU Member State (Federal Ministry for Economic Affairs and Energy 2016, Regulation 2014, EC 2011) which are based on concerns that auditors’ provided NAS may impair auditor independence. Empirical evidence in Germany as well as in other Continental European countries is limited. We use a sample of 2567 firm-year observations from German listed firms between 2006 and 2013 and test the association between the level and type of non-audit service fees (NAS fees) paid to the auditor and audit quality. Earnings management is used as a proxy for audit quality. The findings indicate that the higher levels of NAS fees negatively affect audit quality. Separating different types of NAS shows that especially other assurance and other consultancy services have a negative impact on audit quality, whereas the level of tax services has no impact on audit quality. In further tests we show that cap on NAS fees at 70% of averaged three prior years audit fees imposed by the EU fails to prevent an impairment of audit quality, but that a moderate level of NAS does not result in lower audit quality compared to audit quality of auditors providing no NAS.
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Citations
A theoretical approach to auditor independence and audit quality
Rahman Yakubu,Tracey Williams +1 more
TL;DR: In this article, the impact of auditor independence on audit quality has been investigated and the importance of auditors' independence to audit quality is discussed. But, the authors focus on the audit quality and not the auditor's independence, which has been described as the probability that the auditor will uncover and report any breach in the accounting system.
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•Posted Content
Auditor independence and the provision of non-audit services: perceptions by German investors
TL;DR: In this article, an empirical investigation of the impact of non-audit advisory services (NAS) on investors' perceptions of auditor independence in Germany has been conducted, and it was found that shareholders generally perceive a negative effect on auditor's independence if NAS are provided.
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The audit expectation gap and strengthened independence standards in the European Union: measuring the effects of the new EU Directive
TL;DR: The European Union has addressed the moral hazard that auditors may present by doubly reinforcing auditor independence as discussed by the authors, which has been done through the formulation of a general principle of independ...
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Differential spillover effects of different non-audit fees on audit report lag
TL;DR: In this paper , the effects of audit-related non-audit fees, tax fees and other non audit fees are compared in an audit report lag model to determine whether they are the same statistically.
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Audit quality and classification shifting: evidence from UK and Germany
Muhammad Usman,Jacinta C. Nwachukwu,Ernest Ezeani,Rami Ibrahim A. Salem,Bilal Shaza Elmahi Bilal,Frank Obenpong Kwabi +5 more
TL;DR: The audit quality and classification shifting study finds that audit committee size, meetings, gender diversity and financial expertise deter CS among UK and German firms. However, audit committee size is positively related to CS among German firms but has no impact on UK firms.
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