Intertemporal Associations between Non-Audit Services and Auditors' Tendency to Allow Discretionary Accruals

10.6293/AQAFA.2009.07.07

Myungsoo Son；Kung H. Chen；Aaron D. Crabtree

Non-audit services ； Discretionary accruals

Advances in Quantitative Analysis of Finance and Accounting

7期（2009 / 06 / 01）

149 - 174

英文

We examine whether capital market perception regarding non-audit services alters auditors' tendency to allow firms' discretionary accruals. Since the market may view non-audit services as impairing auditors' independence and then high litigation risk is present for firms with large non-audit services, auditors are likely to employ conservative accounting for such firms. In order for auditors to observe the market's perception regarding non-audit services, there should be a time lag. We hypothesize and find that lagged non-audit services make auditors to apply more conservative thresholds to offset potential litigation risks.

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