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Do Non–Audit Service Fees Impair Auditor Independence? Evidence from Going Concern Audit Opinions
Author(s) -
DeFond Mark L.,
Raghunandan K.,
Subramanyam K.R.
Publication year - 2002
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/1475-679x.00088
Subject(s) - auditor independence , audit , business , accounting , endogeneity , reputation , independence (probability theory) , auditor's report , incentive , joint audit , quality audit , inherent risk (accounting) , service (business) , audit evidence , actuarial science , economics , internal audit , marketing , econometrics , political science , statistics , mathematics , law , microeconomics
We find no significant association between non–audit service fees and impaired auditor independence, where auditor independence is surrogated by auditors’ propensity to issue going concern audit opinions. We also find no association between going concern opinions and either total fees or audit fees. In addition, our findings are robust to controlling for unexpected fees, to controlling for endogeneity among our variables, and to several alternative research design specifications. Our results are consistent with market–based incentives, such as loss of reputation and litigation costs, dominating the expected benefits from compromising auditor independence.