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Does the provision of non-audit services by incumbent auditors reduce the quality of reported income?

Project Member(s): Taylor, S., Francis, J.

Start year: 2001

Summary: The provision of non-audit services by the auditor has been subject to varying levels of regulation around the world. However, recent proposals by the United States regulator have resulted in the sale of consulting businesses by several of the largest accounting firms. This action is despite the lack of any rigorous evidence on whether the provision of non-audit services really impacts on the quality of reported earnings (i.e. the observable output from auditing). This project takes advantage of the required disclosure by Australian firms of both audit fees and any fee paid to the auditor for non-audit services to directly test the impact of non-audit services on the quality of reported income.

Keywords: Earnings quality; Auditor independence; Non-audit services; Earrnings management; Audit quality

FOR Codes: Financial Accounting, Auditing and Accountability, Industrial organisations, Industry policy