Study of Nonaudit Services, Low Balling, Audit Tenure, and Auditor Type: New Zealand and Australian Evidence

Abstract

This article investigates the reasons for supply of nonaudit services by the incumbent auditor. The audit and nonaudit fee data for listed companies in New Zealand and Australia is used in the study. The results suggest that the simultaneous provision of audit and nonaudit services are for efficiency reasons rather than to maximize revenue for the auditors. Hence the regulations in place to restrict the amount of nonaudit services that an auditor can provide its client may result in inefficiencies or incurrence of unnecessary costs for the client and auditor.

Review of Post‐CLERP 9 Australian Auditor Independence Research

“…They claim their findings indicate the provision of NAS by the incumbent auditor does not compromise auditor independence – despite acknowledging a significant relation between discretionary accruals and the logarithm transformation of audit and non‐audit fees. Consistent with the conclusions of Patel and Saune () and Rusmin et al (), Bugeja () does not find any significant association between takeover premiums and the levels of NAS provided by the target firm auditor throughout 1996–2006. The results are robust to partitioning before and after 2002.…”

“…In response to concerns that auditor‐provided NAS are a threat to auditor independence, CLERP 9 introduced mandatory disclosure in the annual report of fees paid for NAS, and an audit committee declaration that any purchased NAS is compatible with auditor independence. There are mixed results in this regard in studies using data prior to CLERP 9 (Ye et al ; Ruddock et al ; Gul et al ; Carey et al ; Patel and Saune ; Bugeja ), and contemporaneous with CLERP 9 (Rusmin et al ; Wines , ; Bugeja ; Hossain ).…”

“…The paper concludes that restricting the supply of NAS is unlikely to result in increased independence in fact, although independence in appearance may be improved. Sympathetic to this view, Patel and Saune () study Australian and New Zealand companies for 2000–2004 and claim their results suggest the simultaneous provision of audit and NAS are for efficiency reasons rather than to maximize revenue for the auditors. The paper concludes that restricting the supply of NAS by auditors may result in inefficiencies or incurrence of unnecessary costs for the client and auditor.…”

The Audit Reform and Non-Audit Services in the Light of the Big-4 Transparency Reports – the EU Perspective

“…It leads to multiple studies presenting different approaches towards NAS. Some researchers examine NAS as one group of non-statutory audit services or consulting services (e.g., Firth, 1997, Patel, Varma, andPrasad, 2009). There are researchers who consider specifically tax services (e.g., Aschauer andQuick, 2018, Kwak andPark, 2020).…”

Ανεξαρτησία Ορκωτού Ελεγκτή, Ελεγκτικές Αμοιβές Και Ποιότητα Λογιστικού Ελέγχου

“…Η σχέση της θητείας του ελεγκτή με τις ελεγκτικές αμοιβές βασίζεται σε προηγούμενες μελέτες (Hay et al, 2006;Hay, 2013;Ball et al, 2015). Για τη διερεύνηση της σχέσης μεταξύ των ελεγκτικών αμοιβών (AF) και μη ελεγκτικών αμοιβών (NAF) η έρευνα εστιάστηκε στις μελέτες των Barkess και Simnett (1994), Ezzamel et al (1996), Antle et al (2006), Patel et al, 2010και Chan et al (2012. Επίσης, για τον έλεγχο της μόχλευσης (LEV), της απόδοσης του ενεργητικού (ROA) και του μεγέθους της ελεγχόμενης εταιρείας (SIZE) η έρευνα βασίζεται σε μελέτη του Campa (2013).…”