File(s) under permanent embargo
Non-audit services, auditor quality and the value relevance of earnings
journal contribution
posted on 2006-12-01, 00:00 authored by Ferdinand GulFerdinand Gul, J Tsui, D S DhaliwalThis paper tests the hypothesis that there is an inverse relation between non-audit services (NAS) provided by a firm auditor and the value relevance of earnings(measured as the earnings response coefficient) and that this relation is weaker for firms with Big 6 auditors. The hypothesis is based on anecdotal evidence and previous research that suggests that the provision of NAS by the external auditor is likely to adversely affect investors’ perceptions of the credibility of financial reports, and that Big 6 auditors, because of reputational capital and litigation costs,are likely to mitigate the adverse effects of NAS. Results using 840 firm-year observations of Australian companies document a statistically significant inverse relationship between NAS and the value relevance of earnings, and this inverse relationship is weaker for Big 6 auditors, therefore supporting the hypothesis.
History
Journal
Accounting and financeVolume
46Issue
5Pagination
797 - 817Publisher
Wiley-BlackwellLocation
Chichester, Eng.Publisher DOI
ISSN
0810-5391eISSN
1467-629XLanguage
engPublication classification
C Journal article; C1.1 Refereed article in a scholarly journalCopyright notice
2006, AFAANZUsage metrics
Categories
No categories selectedLicence
Exports
RefWorks
BibTeX
Ref. manager
Endnote
DataCite
NLM
DC