Non-Audit Services and Knowledge Spillovers: An Investigation of the Audit Report Lag
Non-Audit Services and Knowledge Spillovers: An Investigation of the Audit Report Lag
Angela Walker and David Hay1
University of Auckland
Acknowledgements: We gratefully acknowledge helpful comments by Robert
Knechel, Yi-Hsing Liao, and participants at the International Symposium on Audit
Research in Maastricht and the Australian National Centre for Audit and Assurance
Research workshop at Australian National University. This research was supported by a grant from the University of Auckland under the Thesis and Research Essay
Publication Scholarships scheme.
1
Corresponding author: David Hay, Professor of Auditing, Department of
Accounting and Finance, The University of Auckland Business School,
Owen G Glenn Building, 12 Grafton Road, Auckland, Private Bag 92019, Auckland
1142, New Zealand.
Phone 64 9 923 4878
Fax 64 9 373 7406
Email d.hay@auckland.ac.nz
1
Electronic copy available at: http://ssrn.com/abstract=1852836
Non-Audit Services and Knowledge Spillovers: An Investigation of the Audit Report Lag
Abstract:
Purpose: The accounting profession has argued strongly against claims that the provision of non-audit services to audit clients leads to impaired auditor independence, instead claiming that the joint provision of non-audit services and audit services creates knowledge spillovers that lead to a more efficient audit. In this paper, we seek to provide evidence concerning knowledge spillovers by examining the association between the audit report lag and non-audit services.
Design/methodology/approach: We obtain a sample of 260 firm-year observations from the financial reports of New Zealand public companies over the period 20042005 and test for associations between non-audit services and audit report lag, controlling for other variables.
Findings: We find evidence that non-audit services are associated with a shorter audit report lag, but that this occurs in a subsequent period, not in the year in which the services are provided.
Practical implications:
Angela Walker and David Hay1
University of Auckland
Acknowledgements: We gratefully acknowledge helpful comments by Robert
Knechel, Yi-Hsing Liao, and participants at the International Symposium on Audit
Research in Maastricht and the Australian National Centre for Audit and Assurance
Research workshop at Australian National University. This research was supported by a grant from the University of Auckland under the Thesis and Research Essay
Publication Scholarships scheme.
1
Corresponding author: David Hay, Professor of Auditing, Department of
Accounting and Finance, The University of Auckland Business School,
Owen G Glenn Building, 12 Grafton Road, Auckland, Private Bag 92019, Auckland
1142, New Zealand.
Phone 64 9 923 4878
Fax 64 9 373 7406
Email d.hay@auckland.ac.nz
1
Electronic copy available at: http://ssrn.com/abstract=1852836
Non-Audit Services and Knowledge Spillovers: An Investigation of the Audit Report Lag
Abstract:
Purpose: The accounting profession has argued strongly against claims that the provision of non-audit services to audit clients leads to impaired auditor independence, instead claiming that the joint provision of non-audit services and audit services creates knowledge spillovers that lead to a more efficient audit. In this paper, we seek to provide evidence concerning knowledge spillovers by examining the association between the audit report lag and non-audit services.
Design/methodology/approach: We obtain a sample of 260 firm-year observations from the financial reports of New Zealand public companies over the period 20042005 and test for associations between non-audit services and audit report lag, controlling for other variables.
Findings: We find evidence that non-audit services are associated with a shorter audit report lag, but that this occurs in a subsequent period, not in the year in which the services are provided.
Practical implications:
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