خدمات غیرحسابرسی و کیفیت حسابرسی — اثر قانون ساربنز-آکسلی Non-audit services and audit quality — the effect of Sarbanes-Oxley Act

1. Introduction Since the occurrence of the Enron scandal, the U.S. passed the Sarbanes-Oxley Act in 2002 in order to restore confidence in the capital market. The Act imposes new regulations on auditor independence in order to ensure and improve audit quality in response to the offering of the extensive non-audit services by Arthur Andersen to Enron. In 2001, Arthur Andersen charged Enron US$25 million for auditing services and $27 million for non-audit services. The U.S. juridical authorities believe that the offering of non-audit services hampers the independence of auditors. Therefore, the Sarbanes-Oxley Act specifies the scope of non-audit services to clients by auditors, and stipulates the annual disclosure of audit fees and non-audit service fees. Opinions are divided regarding the restrictions that the Sarbanes-Oxley Act place on non-audit fees. Proponents indicate that, if the percentage of non-audit service fees is too high, auditors are likely to yield to clients regarding the loss of concentrated incomes, thus, losing their independence; while opponents argue that the demand for non-audit services naturally increase with the diversified developments of the corporate world. Meanwhile, nonaudit services may cause clients to become even more dependent on auditors; hence, the independence of auditors is augmented. In fact, non-audit services enhance the auditors’ understanding of clients, and their ability to identify issues, which improves audit quality without compromising the independence of auditors. Literature suggests that increased non-audit service offerings enhance the economic dependence of auditors regarding specific clients, while challenging the independence of auditors (Simunic, 1984). However, concern over reputation and litigation costs is a gating factor to the integrity of auditors’ independence (Davis & Simon, 1992). In sum, whether the delivery of non-audit services by auditors affects audit quality is a contentious issue. Empirically, Frankel, Johnson, and Nelson (2002) referred to earnings management as an indicator, and found that increased percentages of nonaudit fees, as well as a rise in the absolute amount of non-audit fees, have negative effects on audit quality. However, Ashbaugh, LaFond, and Mayhew (2003), Chung and Kallapur (2003), Larcker and Richardson (2004), and Ruddock, Taylor and Taylor (2006) did not suggest that the existence of non-audit services affect audit quality and earnings quality. Krishnan, Sami and Zhang (2005), and Francis and Ke (2006), examined the 2001 data, taken before the SarbanesOxley Act, the results suggested that the audit quality of firms is poorer if the percentage of non-audit service fees is high. Lim and Tan (2008) reviewed the same annual data and concluded that the presence of non-audit services is detrimental to audit quality. Criticism of the Sarbanes-Oxley Act holds that the act is overly stringent, detailed, and cumbersome, causing extra governance costs to companies. Article 404 in particular increases listing costs and litigation risks, and damages the competitiveness of U.S. capital markets. Dispute over the causal relation between non-audit services and audit quality centers on whether such a relation changed after the updated regulations of the Sarbanes-Oxley Act in 2002 regarding the independence of auditors and restrictions over the scope of non-audit services.