The European audit reform aims to stabilize financial markets by enhancing trust in the statutory audit. To strengthen auditor independence and to increase audit quality, the provision of nonaudit services to audit clients is further restricted. The supranational introduction of a blacklist, including prohibited non-audit services, and of a cap on the volume of non-audit fees is a novelty on the European level. The purpose of this paper is threefold. First, we analyze these measures in light of both current national restrictions of non-audit services and auditor fee disclosure requirements in France, Germany and the UK. Second, we assess the potential impact of the cap on the volume of non-audit services by providing descriptive evidence on current fee levels in these three countries. Third, we critically assess the impact of the audit reform regarding non-audit services in light of audit research by analyzing the state of the art. On this basis, we doubt whether the European reform of auditor-provided non-audit services is effective and efficient. The main goal of enhancing perceived auditor independence and, thus, public trust in audited financial statements of public-interest entities may be hardly achieved and the blacklist might present a tradeoff between auditor independence and audit quality.

No abstract

No abstract

The purpose of this study is to investigate the impact of auditor reputation and nonaudit services on audit pricing in the context of large private audit clients. Focusing on German large private clients, we use a low litigious audit environment that allows us to investigate the role of auditor reputation as proxied by auditor type for three auditor tiers. We find evidence for a Big 4 audit fee premium, suggesting the pronounced role of auditor reputation even in a private client segment. However, this premium is subject to the Big 4 auditor's role in the national audit market. Audit pricing is also affected by nonaudit services, which add value to the audit engagement for the client. Nonaudit fees further incentivize pricing strategies for audits of private audit clients, particularly for Big 4 auditors, which indicates a joint effect of nonaudit fees and auditor type on audit fees.