Non-audit services and the corporate governance of audit clients

This paper investigates whether firms with strong corporate governance perceive non-audit services (NAS) as a threat to auditor independence or as a mechanism to improve audit quality. The sample consisted of 706 firms listed on Bursa Malaysia in 2014 and employed six proxies for corporate governanc...

Full description

Bibliographic Details
Published in:Management and Accounting Review
Main Author: Kamarudin K.A.; Ismail W.A.W.; Yatan J.C.
Format: Article
Language:English
Published: Universiti Teknologi Mara 2019
Online Access:https://www.scopus.com/inward/record.uri?eid=2-s2.0-85113653300&doi=10.24191%2fmar.v18i1.824&partnerID=40&md5=110c429c93209d71adee1409ceb483b3
id 2-s2.0-85113653300
spelling 2-s2.0-85113653300
Kamarudin K.A.; Ismail W.A.W.; Yatan J.C.
Non-audit services and the corporate governance of audit clients
2019
Management and Accounting Review
18
1
10.24191/mar.v18i1.824
https://www.scopus.com/inward/record.uri?eid=2-s2.0-85113653300&doi=10.24191%2fmar.v18i1.824&partnerID=40&md5=110c429c93209d71adee1409ceb483b3
This paper investigates whether firms with strong corporate governance perceive non-audit services (NAS) as a threat to auditor independence or as a mechanism to improve audit quality. The sample consisted of 706 firms listed on Bursa Malaysia in 2014 and employed six proxies for corporate governance. The findings show that firms with a bigger audit committee and a higher proportion of independent members in the audit committee are linked with higher NAS, consistent with the resource-based view. The study also found that audit firms in the Big 4 were paid a higher amount of NAS compared to non-Big 4 firms., in line with the general view that the Big 4 auditors supply higher quality services than the non-Big 4. However, it was also found that a more independent board of directors is associated with a low NAS. This suggests that although the board of directors might perceive NAS a threat to auditor independence, a strong audit committee subscribes to the argument that the benefits outweigh the costs. This study contributes to the present literature on the determinants of NAS in an emerging market and would be informative to regulators worldwide when considering new policies related to NAS. © 2019, Universiti Teknologi Mara. All rights reserved.
Universiti Teknologi Mara
26007975
English
Article
All Open Access; Gold Open Access
author Kamarudin K.A.; Ismail W.A.W.; Yatan J.C.
spellingShingle Kamarudin K.A.; Ismail W.A.W.; Yatan J.C.
Non-audit services and the corporate governance of audit clients
author_facet Kamarudin K.A.; Ismail W.A.W.; Yatan J.C.
author_sort Kamarudin K.A.; Ismail W.A.W.; Yatan J.C.
title Non-audit services and the corporate governance of audit clients
title_short Non-audit services and the corporate governance of audit clients
title_full Non-audit services and the corporate governance of audit clients
title_fullStr Non-audit services and the corporate governance of audit clients
title_full_unstemmed Non-audit services and the corporate governance of audit clients
title_sort Non-audit services and the corporate governance of audit clients
publishDate 2019
container_title Management and Accounting Review
container_volume 18
container_issue 1
doi_str_mv 10.24191/mar.v18i1.824
url https://www.scopus.com/inward/record.uri?eid=2-s2.0-85113653300&doi=10.24191%2fmar.v18i1.824&partnerID=40&md5=110c429c93209d71adee1409ceb483b3
description This paper investigates whether firms with strong corporate governance perceive non-audit services (NAS) as a threat to auditor independence or as a mechanism to improve audit quality. The sample consisted of 706 firms listed on Bursa Malaysia in 2014 and employed six proxies for corporate governance. The findings show that firms with a bigger audit committee and a higher proportion of independent members in the audit committee are linked with higher NAS, consistent with the resource-based view. The study also found that audit firms in the Big 4 were paid a higher amount of NAS compared to non-Big 4 firms., in line with the general view that the Big 4 auditors supply higher quality services than the non-Big 4. However, it was also found that a more independent board of directors is associated with a low NAS. This suggests that although the board of directors might perceive NAS a threat to auditor independence, a strong audit committee subscribes to the argument that the benefits outweigh the costs. This study contributes to the present literature on the determinants of NAS in an emerging market and would be informative to regulators worldwide when considering new policies related to NAS. © 2019, Universiti Teknologi Mara. All rights reserved.
publisher Universiti Teknologi Mara
issn 26007975
language English
format Article
accesstype All Open Access; Gold Open Access
record_format scopus
collection Scopus
_version_ 1809677904324329472