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Non‐audit Services and Auditor Independence: New Zealand Evidence

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  • David Hay
  • Robert Knechel
  • Vivian Li

Abstract

This paper examines evidence in New Zealand about whether auditors providing more non‐audit services are less independent. Three sets of tests are used to address the issue. The first examines whether there is a relation between non‐audit fees and audit fees, the second examines whether there is a relation between non‐audit fees and audit report qualification or modification, and the third examines whether there is a relation between non‐audit fees and stability of audit tenure. The results suggest a potential for the impairment of auditor independence in appearance when auditors provide non‐audit services but no evidence of any impact on independence of mind.

Suggested Citation

  • David Hay & Robert Knechel & Vivian Li, 2006. "Non‐audit Services and Auditor Independence: New Zealand Evidence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(5‐6), pages 715-734, June.
    • Handle: RePEc:bla:jbfnac:v:33:y:2006:i:5-6:p:715-734
    DOI: 10.1111/j.1468-5957.2006.00602.x
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    3. Umapathy Ananthanarayanan, 2018. "Do Corporate Governance Measures Impact Audit Pricing Of Smaller Firms? Evidence From The United States And New Zealand," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 12(2), pages 77-94.
    4. Dart, Eleanor, 2011. "UK investors’ perceptions of auditor independence," The British Accounting Review, Elsevier, vol. 43(3), pages 173-185.
    5. De Fuentes, Cristina & Porcuna, Rubén, 2016. "Main drivers of consultancy services: A meta-analytic approach," Journal of Business Research, Elsevier, vol. 69(11), pages 4775-4780.
    6. L. Van De Velde & I. De Beelde, 2009. "Audit- and non-audit fees and company characteristics in Belgium," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/589, Ghent University, Faculty of Economics and Business Administration.
    7. Marcel Haak & Michelle Muraz & Roland Zieseniß, 2018. "Joint Audits: Does the Allocation of Audit Work Affect Audit Quality and Audit Fees?," Accounting in Europe, Taylor & Francis Journals, vol. 15(1), pages 55-80, January.
    8. Shan, Yuan George & Troshani, Indrit & Tarca, Ann, 2019. "Managerial ownership, audit firm size, and audit fees: Australian evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 35(C), pages 18-36.
    9. Adel Chouaya, 2008. "Effet de l'obligation de publier les honoraires d'audit sur les honoraires des exercices ultérieurs : Le cas français," Post-Print halshs-00522481, HAL.
    10. Al-Okaily, Jihad & BenYoussef, Nourhene, 2020. "Audit committee effectiveness and non-audit service fees: Evidence from UK family firms," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 41(C).
    11. Fleischer, Rouven & Goettsche, Max, 2012. "Size effects and audit pricing: Evidence from Germany," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 21(2), pages 156-168.
    12. Wenxia Ge & Jeong‐Bon Kim, 2020. "How does the executive pay gap influence audit fees? The roles of R&D investment and institutional ownership," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(5-6), pages 677-707, May.
    13. Chan-Chuan Ting, 2023. "The Association Between Changes in Key Audit Matters and Earnings Management Behavior in Companies," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 13(6), pages 1-3.
    14. Domenico Campa & Ray Donnelly, 2016. "Non-audit services provided to audit clients, independence of mind and independence in appearance: latest evidence from large UK listed companies," Accounting and Business Research, Taylor & Francis Journals, vol. 46(4), pages 422-449, June.
    15. Jeroen van Raak & Erik Peek & Roger Meuwissen & Caren Schelleman, 2020. "The effect of audit market structure on audit quality and audit pricing in the private‐client market," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(3-4), pages 456-488, March.
    16. Bugeja, Martin, 2011. "Takeover premiums and the perception of auditor independence and reputation," The British Accounting Review, Elsevier, vol. 43(4), pages 278-293.
    17. Geiger, Marshall A. & Basioudis, Ilias G. & DeLange, Paul, 2022. "The effect of non-audit fees and industry specialization on the prevalence and accuracy of auditor’s going-concern reporting decisions," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 47(C).
    18. Roger Meuwissen & Reiner Quick, 2009. "Abschlussprüfung und Beratung - Eine experimentelle Analyse der Auswirkungen auf Unabhängigkeitswahrnehmungen deutscher Aufsichtsräte," Schmalenbach Journal of Business Research, Springer, vol. 61(4), pages 382-415, June.
    19. Yi-Hsing Liao & Pih-Shuw Chen & Teng-Sheng Sang & Chia-Hsuan Tseng, 2020. "Does Client Importance Matter to Book-Tax Differences?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(5), pages 1-17.

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