The Association between Non-Audit Services and the Propensity of Going Concern Qualifications: Implications for Audit Independence
Posted: 1 Apr 2002
This study examines the association between non-audit fees (NAS) as a proportion of total fees (PROPNAS) and auditors' propensity to issue a going concern qualification to clients facing imminent bankruptcy. Clients generating higher (lower) PROPNAS are expected to be less likely (more likely) to receive a going concern qualification in the year immediately preceding bankruptcy. The results of the study, using a small sample of 49 bankrupt Australian companies, are consistent with the hypothesized association between PROPNAS and the propensity of a going concern qualification. Implications of the results for auditor independence are discussed.
Keywords: auditor independence, non-audit service fees, audit fees, going concern qualifications
JEL Classification: M49
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