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Non-audit services and knowledge spillovers

Meditari accountancy research, 2013-01, Vol.21 (1), p.32 [Peer Reviewed Journal]

Copyright Emerald Group Publishing Limited 2013 ;ISSN: 2049-372X ;EISSN: 2049-3738

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  • Title:
    Non-audit services and knowledge spillovers
  • Author: Walker, Angela ; Hay, David
  • Subjects: Audit fees ; Auditors ; Audits ; Economic models ; Economic theory ; Fees & charges ; Financial statements ; Knowledge ; Studies ; Tax services
  • Is Part Of: Meditari accountancy research, 2013-01, Vol.21 (1), p.32
  • Description: Purpose - The accounting profession has argued strongly against claims that the provision of non-audit services to audit clients leads to impaired auditor independence, instead claiming that the joint provision of non-audit services and audit services creates knowledge spillovers that lead to a more efficient audit. This paper seeks to provide evidence concerning knowledge spillovers by examining the association between the audit report lag and non-audit services. Design/methodology/approach - The authors obtained a sample of 260 firm-year observations from the financial reports of New Zealand public companies over the period 2004-2005 and tested for associations between non-audit services and audit report lag, controlling for other variables. Findings - The paper finds evidence that non-audit services are associated with a shorter audit report lag, but that this occurs in a subsequent period, not in the year in which the services are provided. Practical implications - The results suggest that firms purchasing non-audit services from their incumbent auditors benefit from knowledge spillovers by achieving a shorter audit report lag, but not immediately. Originality/value - Previous studies have examined whether there is a relationship between non-audit services and audit report lag in the concurrent period. This paper extends tests to also examine the relationship between NAS in one year and the audit in a subsequent year. These results are more consistent with knowledge spillovers that allow a more efficient audit than they are with loss of independence by the auditor, because loss of independence would take effect immediately, while knowledge spillovers might take time.
  • Publisher: Pretoria: Emerald Group Publishing Limited
  • Language: Afrikaans;English
  • Identifier: ISSN: 2049-372X
    EISSN: 2049-3738
  • Source: ProQuest Central
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