An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

John M. Thornton
Washington State University

Alan Reinstein
Wayne State University

Cathleen L. Miller
Saginaw Valley State University

Abstract: Research indicates that an “expectations gap” exists between users’ and preparers’ perceptions of the effects of non-audit services on auditor independence. The self-serving bias theory and respondent knowledge theory both potentially explain this gap, yet these theories suggest highly divergent approaches to eliminate it. This study empirically tests these two theories simultaneously, using responses from three levels of professional accountants (financial statement preparers) and bank loan officers (financial statement users). We find strong support for the self-serving bias, but limited support, at best, for the respondent knowledge theory. These results have important implications for regulators and standard-setters on approaches to mitigate the “non-audit services expectations gap.”

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