Audit Regulation, Audit Quality, and Audit Research in the Post-Enron Era: An Analysis of Nonaudit Services

Ralf Ewert

in The Economics and Politics of Accounting

Published in print March 2004 | ISBN: 9780199260621
Published online January 2005 | e-ISBN: 9780191601668 | DOI:
 Audit Regulation, Audit Quality, and Audit Research in the Post-Enron Era: An Analysis of Nonaudit Services

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Despite reservations voiced by the scientific community, the perception that combining non-audit services (NAS) and auditing for the same client may be largely responsible for recently observed accounting and audit failures seems to have gained momentum, and currently, it appears that any auditor offering NAS to auditees automatically endangers ‘independence in appearance’. This chapter addresses the question of whether such opinions can be justified by existing research on the issue of combining NAS and auditing. While there are already some reviews of former empirical papers, there is essentially no survey of the related theoretical research and the more recent empirical work. Here, the focus is mainly on the theoretical side, which is critically reviewed and somewhat extended in Section 2 of the chapter, while Section 3 reviews and interprets some new empirical work in the light of the theories presented before. The final section presents conclusions and directions for further research; the conclusion is that there is no evidence that a simultaneous offering of auditing and NAS to the same client unequivocally and systematically impairs auditor independence, and that, in fact, there are instances where NAS are likely to enhance the quality of the audit because they increase the auditors’ capital that is at stake.

Keywords: accounting; accounting failures; audit failures; audit quality; audit regulation; audit research; auditing; auditor independence; non-audit services

Chapter.  10555 words. 

Subjects: Financial Markets

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