Non-audit fees, long-term auditor - client relationships and earnings management

Abstract

We examine whether auditor independence is affected by the amount spent on non-audit services. Faster growth in non-audit fees and longer time periods over which non-audit services are purchased might reduce the auditor's independence from that client. Our results do not provide any support for a relationship between non-audit fee growth rates or the length of time of the non-audit fee relationship with the client and discretionary accruals, our measure of earnings management. We do find some evidence that the interaction of the non-audit fee time-period measures and client importance is positive and significantly related to discretionary accruals.