Non-audit services and financial reporting quality: evidence from 1978 to 1980

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Non-audit services and financial reporting quality: evidence from 1978 to 1980

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Title: Non-audit services and financial reporting quality: evidence from 1978 to 1980
Author: Koh, Kevin; Rajgopal, Shiva; Srinivasan, Suraj

Note: Order does not necessarily reflect citation order of authors.

Citation: Koh, Kevin, Shiva Rajgopal, and Suraj Srinivasan. "Non-Audit Services and Financial Reporting Quality: Evidence from 1978–1980." Review of Accounting Studies 18, no. 1 (March 2013): 1–33.
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Abstract: We provide evidence for the long-standing concern on auditor conflicts of interest from providing non-audit services (NAS) to audit clients by using rarely explored NAS fee data from 1978 to 1980. Using this earlier setting, we find cross-sectional evidence of improved earnings quality when auditors provide NAS, especially those related to information services. This is consistent with better audit quality from knowledge spillovers due to the joint offering of audit and consulting services. Events related to the repeal of these NAS disclosures in 1982 are associated with a small positive stock price reaction suggesting no adverse economic consequences of withdrawing NAS disclosures. Further, following the repeal of disclosure requirements we find no change in the earnings quality of client firms. In sum, data drawn from an earlier time period suggest that auditors' reputational incentives, possible synergies, and knowledge transfers imply that NAS offered by audit firms can be associated with improved audit and reporting quality in client firms.
Published Version: http://link.springer.com/article/10.1007/s11142-012-9187-6
Other Sources: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1886489
Terms of Use: This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAP
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:29660920
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