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The Economics and Politics of AccountingInternational Perspectives on Trends, Policy, and Practice$
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Christian Leuz, Dieter Pfaff, and Anthony Hopwood

Print publication date: 2004

Print ISBN-13: 9780199260621

Published to Oxford Scholarship Online: January 2005

DOI: 10.1093/0199260621.001.0001

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Audit Regulation, Audit Quality, and Audit Research in the Post-Enron Era: An Analysis of Nonaudit Services

Audit Regulation, Audit Quality, and Audit Research in the Post-Enron Era: An Analysis of Nonaudit Services

Chapter:
(p.239) CHAPTER 4.3 Audit Regulation, Audit Quality, and Audit Research in the Post-Enron Era: An Analysis of Nonaudit Services
Source:
The Economics and Politics of Accounting
Author(s):

Ralf Ewert

Publisher:
Oxford University Press
DOI:10.1093/0199260621.003.0010

Despite reservations voiced by the scientific community, the perception that combining non-audit services (NAS) and auditing for the same client may be largely responsible for recently observed accounting and audit failures seems to have gained momentum, and currently, it appears that any auditor offering NAS to auditees automatically endangers ‘independence in appearance’. This chapter addresses the question of whether such opinions can be justified by existing research on the issue of combining NAS and auditing. While there are already some reviews of former empirical papers, there is essentially no survey of the related theoretical research and the more recent empirical work. Here, the focus is mainly on the theoretical side, which is critically reviewed and somewhat extended in Section 2 of the chapter, while Section 3 reviews and interprets some new empirical work in the light of the theories presented before. The final section presents conclusions and directions for further research; the conclusion is that there is no evidence that a simultaneous offering of auditing and NAS to the same client unequivocally and systematically impairs auditor independence, and that, in fact, there are instances where NAS are likely to enhance the quality of the audit because they increase the auditors’ capital that is at stake.

Keywords:   accounting, accounting failures, audit failures, audit quality, audit regulation, audit research, auditing, auditor independence, non-audit services

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