Nonaudit services and earnings management in the Pre-SOX and Post-SOX eras

Auditing

Volumn 30, Issue 3, 2011, Pages 103-123

  Krishnan, Jayanthi ^a   Su, Lixin ^b   Zhang, Yinqi ^c  

^a TEMPLE UNIVERSITY   (United States)

^b HONG KONG POLYTECHNIC UNIVERSITY   (Hong Kong)

^c AMERICAN UNIVERSITY   (United States)

Author keywords

Earnings management; Nonaudit services; Sarbanes Oxley Act

Indexed keywords

EID: 80052229094     PISSN: 02780380     EISSN: 15587991     Source Type: Journal    
DOI: 10.2308/ajpt-10050     Document Type: Article

References (45)

1. Abbott, J. L., S. Parker, and G. F. Peters. 2006. Earnings management, litigation risk, and asymmetric audit fee responses. Auditing: A Journal of Practice & Theory 25 (1): 85-98.
2. Antle, R., E. Gordon, G. Narayanamoorthy, and L. Zhou. 2006. The joint determination of audit fees, nonaudit fees, and abnormal accruals. Review of Quantitative Finance and Accounting 27 (3): 235-266.
3. Ashbaugh, H., R. LaFond, and B. W. Mayhew. 2003. Do nonaudit services compromise auditor independence? Further evidence. The Accounting Review 78 (3): 611-639.
4. Asthana, S., and J. Krishnan. 2006. Factors associated with the early adoption of the SEC's revised auditor fee disclosure rules. Auditing: A Journal of Practice & Theory 25 (2): 41-51.
5. Barron, O., J. Pratt, and J. D. Stice. 2001. Misstatement direction, litigation risk, and planned audit investment. Journal of Accounting Research 39 (3): 449-462.
6. Caramanis, C., and C. Lennox. 2008. Audit effort and earnings management. Journal of Accounting and Economics 45 (1): 116-138.
7. Causholli, M., W. R. Knechel, and J. MacGregor. 2008. An Examination of the Effect of Nonaudit Services and Corporate Governance on Audit Fees before and after Passage of the Sarbanes-Oxley Act of 2002. Working paper, University of Florida and Baylor University.
8. Chen, P., and L. Daley. 1996. Regulatory capital, tax, and earnings management effects on loan loss accruals in the Canadian banking industry. Contemporary Accounting Research 13 (1): 91-128.
9. Chung, H., and S. Kallapur. 2003. Client importance, nonaudit services, and abnormal accruals. The Accounting Review 78 (4): 931-955.
10. Cohen, D. A., A. Dey, and T. Z. Lys. 2008. Real and accrual-based earnings management in the pre- and post-Sarbanes-Oxley periods. The Accounting Review 83 (3): 757-787.
11. Dechow, P. M., R. G. Sloan, and A. P. Sweeney. 1996. Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the SEC. Contemporary Accounting Research 13 (1): 1-36.
12. DeFond, M., R. Hann, and X. Hu. 2005. Does the market value financial expertise on audit committees of boards of directors? Journal of Accounting Research 43 (2): 153-193.
13. DeFond, M. L., K. Raghunandan, and K. R. Subramanyam. 2002. Do nonaudit service fees impair auditor independence? Evidence from going-concern audit opinions. Journal of Accounting Research 40 (4): 1247-1274.
14. Francis, J. R., and B. Ke. 2006. Disclosure of fees paid to auditors and the market valuation of earnings surprises. Review of Accounting Studies 11 (4): 495-523.
15. Frankel, R. M., M. F. Johnson, and K. K. Nelson. 2002. The relation between auditors' fees for nonaudit services and earnings management. The Accounting Review 77 (4): 71-105.
16. Gaynor, L. M. G., L. S. McDaniel, and T. L. Neal. 2006. The effects of joint provision and disclosure of nonaudit services on audit committee members' decisions and investors' preferences. The Accounting Review 81 (4): 873-896.
17. Geiger, M. A., and D. V. Rama. 2003. Audit fees, nonaudit fees, and auditor reporting on stressed companies. Auditing: A Journal of Practice & Theory 22 (2): 53-69.
18. Ghosh, A., and R. Pawlewicz. 2009. The impact of regulation on auditor fees: Evidence from the Sarbanes- Oxley Act. Auditing: A Journal of Practice & Theory 28 (2): 171-197.
19. Heninger, W. G. 2001. The association between auditor litigation and abnormal accruals. The Accounting Review 76 (1): 111-126.
20. Hribar, P., and D. C. Nichols. 2007. The use of unsigned earnings quality measures in tests of earnings management. Journal of Accounting Research 45 (5): 1017-1053.
21. Huang, H-W., S. Mishra, and K. Raghunandan. 2007. Types of nonaudit fees and financial reporting quality. Auditing: A Journal of Practice & Theory 26 (1): 133-145.
22. Keune, B. M., and K. M. Johnstone. 2009. Staff Accounting Bulletin No. 108 disclosures: Descriptive evidence from the revelation of accounting misstatements. Accounting Horizons 23 (1): 19-55.
23. Kinney, W. R., Jr., and R. Libby. 2002. Discussion of the relation between auditors' fees for nonaudit services and earnings management. The Accounting Review 77 (4): 107-114.
24. Kinney W. R., Jr., Z-V. Palmrose, and S. Scholz. 2004. Auditor independence, nonaudit services, and restatements: Was the U.S. government right? Journal of Accounting Research 42 (3): 561-588.
25. Kothari, S., A. Leone, and C. Wasley. 2005. Performance matched discretionary accruals. Journal of Accounting and Economics 39 (1): 163-197.
26. Krishnan, G. V., and G. Visvanathan. 2008. Does the SOX definition of an accounting expert matter? The association between audit committee directors' accounting expertise and accounting conservatism. Contemporary Accounting Research 25 (3): 827-857.
27. Krishnan, J., and J. E. Lee. 2009. Audit committee financial expertise, litigation risk, and corporate governance. Auditing: A Journal of Practice & Theory 28 (1): 241-261.
28. Krishnan, J., H. Sami, and Y. Zhang. 2005. Does the provision of nonaudit services affect investor perceptions of auditor independence? Auditing: A Journal of Practice & Theory 24 (2): 111-135.
29. Larcker, D. F., and S. A. Richardson. 2004. Fees paid to audit firms, accrual choices, and corporate governance. Journal of Accounting Research 42 (3): 625-658.
30. Levitt, A. 2000. Renewing the Covenant with Investors. Remarks delivered at NYU Center for Law and Business. New York, NY. Available at: http://www.sec.gov/news/speech/spch370.htm
31. Lys, T., and R. L. Watts. 1994. Lawsuits against auditors. Journal of Accounting Research 32 (3): 65-93.
32. McLucas, W. R., and P. R. Eckert. 2001. The Securities and Exchange Commission's revised auditor independence rules. The Business Lawyer 56 (3): 877-918.
33. Myers, J. N., L. A. Myers, and T. C. Omer. 2003. Exploring the term of the auditor-client relationship and the quality of earnings: A case for mandatory auditor rotation? The Accounting Review 78 (3): 779-799.
34. Nelson, W. M., J. A. Elliott, and R. L. Tarpley. 2003. How are earnings managed? Examples from auditors. Accounting Horizons 17 (4): 17-35.
35. Palmrose, Z-V., and S. Scholz. 2004. The circumstances and legal consequences of non-GAAP reporting: Evidence from restatements. Contemporary Accounting Research 21 (1): 139-180.
36. Raghunandan, K., W. J. Read, and J. S. Whisenant. 2003. Initial evidence on the association between nonaudit fees and restated financial statements. Accounting Horizons 17 (3): 223-234.
37. Reynolds, J. K., D. Deis, and J. Francis. 2004. Professional service fees and auditor objectivity. Auditing: A Journal of Practice & Theory 23 (1): 29-52.
38. Securities and Exchange Commission (SEC). 2000a. Proposed Rule: Revision of the Commission's Auditor Independence Requirements. File No. S7-13-00. Washington D.C.: SEC.
39. Securities and Exchange Commission (SEC). 2000b. Final Rule: Revision of the Commission's Auditor Independence Requirements. File No. S7-13-00. Washington D.C.: SEC.
40. Securities and Exchange Commission (SEC). 2003. Final Rule: Strengthening the Commission's Requirements Regarding Auditor Independence. File No. S7-49-02. Washington D.C.: SEC.
41. Simunic, D. A. 1984. Auditing, consulting, and auditor independence. Journal of Accounting Research 22 (2): 679-702.
42. Srinidhi, B., and F. A. Gul. 2007. The differential effects of auditors' nonaudit and audit fees on accrual quality. Contemporary Accounting Research 24 (2): 595-629.
43. St. Pierre, K., and J. Anderson. 1984. An analysis of the factors associated with lawsuits against public accountants. The Accounting Review 54 (2): 242-263.
44. U.S. House of Representatives. 2002. The Sarbanes-Oxley Act of 2002. Public Law 107-204 [H. R. 3763]. Washington, D.C.: Government Printing Office.
45. Whisenant, S., S. Sankaraguruswamy, and K. Raghunandan. 2003. Evidence on the joint determination of audit and nonaudit fees. Journal of Accounting Research 41 (4): 721-744.