Title: Non-audit services and the value relevance of accounting information: a case study

Authors: Hung-Shu Fan, Ching-Lung Chen, Tyson Jung

Addresses: Department of Accounting, Fu Jen Catholic University, Hsinchuang, Taipei County 24205, Taiwan. ' Department of Accounting, National Yunlin University of Science and Technology, Douliou, Yunlin 64002, Taiwan. ' Department of International Trade and Finance, Fu Jen Catholic University, Hsinchuang, Taipei County 24205, Taiwan

Abstract: To increase revenues, audit firms often try to persuade their audit clients to purchase their non-audit services. Listed firms in Taiwan have to disclose their audit/non-audit fees under some conditions. It provides a context for examining whether providing non-audit services by the client|s auditor influences the value relevance of accounting information in Taiwan. The empirical results indicate that the value relevance of earnings (discretionary accruals) decreases in contrast with the value relevance increase of book value for the firms with higher non-audit fee ratio. It supports that providing non-audit service by the firm’s auditor harms earnings quality.

Keywords: non-audit services; value relevance; client services; accounting information; earnings; book value; revenue management; Taiwan; auditors; auditing; fees; discretionary accruals; fee ratios.

DOI: 10.1504/IJRM.2010.030032

International Journal of Revenue Management, 2010 Vol.4 No.1, pp.92 - 117

Published online: 03 Dec 2009 *

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