We appreciate the helpful comments of the anonymous referee, Merle Erickson (editor), Mahmud Hossain, and Yen-Hee Tong.
Non-audit Service Fees and Audit Quality: The Impact of Auditor Specialization
Article first published online: 17 DEC 2007
Journal of Accounting Research
Volume 46, Issue 1, pages 199–246, March 2008
How to Cite
LIM, C.-Y. and TAN, H.-T. (2008), Non-audit Service Fees and Audit Quality: The Impact of Auditor Specialization. Journal of Accounting Research, 46: 199–246. doi: 10.1111/j.1475-679X.2007.00266.x
- Issue published online: 17 DEC 2007
- Article first published online: 17 DEC 2007
- Received 26 January 2006; accepted 9 May 2007
We posit that the effect of non-audit fees on audit quality is conditional on auditor industry specialization. Industry specialist auditors are more likely than nonspecialists to be concerned about reputation losses and litigation exposure, and to benefit from knowledge spillovers from the provision of non-audit services. We find evidence that audit quality measured by increased propensity to issue going-concern opinion, increased propensity to miss analysts' forecasts, as well as higher earnings-response coefficients increases with the level of non-audit services acquired from industry specialist auditors compared to nonspecialist auditors.