Scientific empirical research on non-audit fees and the impact on audit quality.

The main purpose of this study is to determine whether there is a link between non-audit services and audit quality on the Belgian audit market. More specifically, the study will determine whether, and to what extent, the services provided by companies' statutoryauditors and their network, in addition to the performance of their audit assignment, affect their independence and the quality of the audit. Investigating this link is relevant given the current debate at European level, in response to the financial crisis, about therestriction on or even complete prohibition of the provision of non-audit services by auditors to their audit clients. The study consists of two parts. In the first part, we give a brief historical overview of the regulatory framework for non-audit services, taking into account both the Belgian and international situation, in particular American and European initiatives. Next, we focus on the evolution and composition of fees for both audit and non-audit services in Belgium over the period 2008-2010 and make a comparison with developments in other countries. We conclude the first part by addressing the empirical studies that examine at an international level the link between (fees for) non-audit services and audit quality. The literature review shows that the empirical studies have ambiguous results. In the second part, we examine whether there is effectively a link between non-audit services and audit quality on the Belgian audit market. To this end, use is made of multivariate regression analyses in order to assess the link between, on the one hand, the response or dependent variable (in this case the audit quality) and, on the other hand, the explanatory or independent variables (in this case the test variable, namely the non-audit services) and various control variables (such as the company size, the age and the financial situation) that can also have an impact on audit quality as shown in the literature. The results of these regression analyses permit us to conclude that there is little empirical support for the assumption that non-audit services have an impact (neither negative nor positive) on audit quality.

Keywords:AUDIT QUALITY, BUSINESS ECONOMICS, AUDIT

Disciplines:Applied economics, Economic history, Macroeconomics and monetary economics, Microeconomics, Tourism

Project type:Collaboration project