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Auditor independence: evidence on the joint effects of auditor tenure and nonaudit fees
journal contribution
posted on 2007-11-01, 00:00 authored by Ferdinand GulFerdinand Gul, B L Jaggi, G V KrishnanThis study examines whether the impact of nonaudit fees on auditor independence is contingent on auditor tenure. The results, based on a sample of 4,720 U.S. firms for the years 2000 and 2001, show that there is a positive association between nonaudit fees and positive discretionary current accruals, a proxy for auditor independence, for firms with short auditor tenure of not more than three years. These findings suggest that non audit fees may impair auditor independence when auditor tenure is short and not when auditor tenure is long. Furthermore, exploratory analyses show that the positive association between non audit fees and earnings management for firms with short auditor tenure is significant for small clients but not for large clients. Taken together, these results suggest that the association between non audit fees and auditor independence is contingent upon auditor tenure, and that high non audit fees have a negative impact on auditor independence when audit tenure is short and client firm size is small.
History
Journal
Auditing: a journal of practice & theoryVolume
26Issue
2Pagination
117 - 142Publisher
American Accounting AssociationLocation
[Lakewood Ranch, Fla.]Publisher DOI
ISSN
0278-0380eISSN
1558-7991Language
engPublication classification
C Journal article; C1.1 Refereed article in a scholarly journalCopyright notice
2007, American Accounting AssociationUsage metrics
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