Abstract
Regulators have expressed concerns that an emphasis on non-audit services (NAS) could distract from the audit function, even for clients with minimal NAS purchases. Motivated by this concern, we examine whether a greater emphasis on providing NAS to audit clients generally (i.e., not to a specific client) can distract from the audit function, thus reducing audit quality. We find evidence of an NAS distraction effect, where a greater emphasis on NAS at the audit office-level results in more client financial statement restatements, even after controlling for client-specific NAS. Further, the association exists among clients that purchase minimal NAS, suggesting that this association relates to distraction effects in addition to independence issues examined in prior research. This study should be of interest to audit firms, audit committees, and regulators because it provides new evidence regarding issues related to a business model that includes both audit and non-audit services.
Original language | English (US) |
---|---|
Article number | 101380 |
Journal | Journal of Accounting and Economics |
Volume | 71 |
Issue number | 2-3 |
DOIs | |
State | Published - Apr 2021 |
Externally published | Yes |
Keywords
- Audit quality
- Auditor distraction
- Auditor fees
- Non-audit services
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics