Investments in Auditor-Provided Non-Audit Services and Future Operating Performance

William Ciconte, W. Robert Knechel, Michael A. Mayberry

Research output: Contribution to journalArticlepeer-review


SUMMARY: The ‘‘organization capital’’ of a firm consists of its internal investments in its business units, processes, know-how, employee skills, and information systems. We investigate whether a firm’s investments in auditor-provided non-audit services (NAS) can supplement its own internal investment in organization capital, resulting in improved operating performance. We find that investments in NAS are positively related to a firm’s subsequent operating performance consistent with NAS augmenting a firm’s organization capital. Firms with low organization capital in general, high complexity, or disruption due to acquisitions benefit the most from purchasing NAS from their auditor. We also show that firms engaging auditors with a high level of expertise manifest higher levels of future operating performance. We find no evidence that the improvement in operating performance subsequent to NAS investment is due to earnings management or lower audit quality.

Original languageEnglish (US)
Pages (from-to)141-164
Number of pages24
Issue number2
StatePublished - May 2022
Externally publishedYes


  • audit quality
  • non-audit services
  • operating performance
  • organization capital

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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