Geiger, Marshall A., Basioudis, Ilias G. and DeLange, Paul (2022). The effect of non-audit fees and industry specialization on the prevalence and accuracy of auditor's going-concern reporting decisions. Journal of International Accounting, Auditing and Taxation, 47 ,
Abstract
The issue of auditors impairing their independence when providing non-audit services (NAS) to audit clients continues to be subject of global regulatory concern. However, the profession has long argued that knowledge gained from providing NAS can spill over to other areas and can serve to improve audit quality. Accordingly, we revisit the effect that NAS have on the likelihood of an auditor issuing a going concern modified opinion (GCMO) to distressed clients, as well as the accuracy of those opinions. We also examine whether industry specialization is associated with GCMO decisions and their accuracy. Our analysis of Australian company audits finds a significant negative association between auditors rendering a GCMO and the magnitude of NAS fees, and that increasing NAS fees are associated with fewer GCMO-related reporting misclassifications. Our analyses also find no strong evidence of an industry specialist auditor effect on GCMO reporting or report accuracy. In sum, our analysis of audit reporting decisions in Australia supports the concerns of regulators regarding reduced GCMOs when NAS fees increase, and also supports the contention of the accounting profession that providing NAS improves the quality of audit decision-making, leading to improved accuracy of GCMO reporting decisions.
Publication DOI: | https://doi.org/10.1016/j.intaccaudtax.2022.100473 |
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Divisions: | College of Business and Social Sciences > Aston Business School > Accounting College of Business and Social Sciences > Aston Business School |
Funding Information: | We would like to thank the two reviewers of the paper as well as the editor of the journal, Professor Robert Larson, for the advice and comments on the paper. Earlier versions of this paper have been presented at Aston University and Nottingham University |
Additional Information: | © 2022 Elsevier Inc. This accepted manuscript version is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License https://creativecommons.org/licenses/by-nc-nd/4.0/ |
Uncontrolled Keywords: | Audit firm specialization,Audit reporting accuracy,Auditor independence,Going concern,Non-audit fees,Accounting,Finance |
Publication ISSN: | 1879-1603 |
Last Modified: | 06 Aug 2024 09:05 |
Date Deposited: | 08 Jul 2022 14:46 |
Full Text Link: | |
Related URLs: |
http://www.scop ... tnerID=8YFLogxK
(Scopus URL) https://www.sci ... 0283?via%3Dihub (Publisher URL) |
PURE Output Type: | Article |
Published Date: | 2022-06 |
Published Online Date: | 2022-05-23 |
Accepted Date: | 2022-05-01 |
Authors: |
Geiger, Marshall A.
Basioudis, Ilias G. ( ![]() DeLange, Paul |
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License: Creative Commons Attribution Non-commercial No Derivatives
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