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

Denise Dickins
East Carolina University

Abstract: Regulators’ most recent attempt to shore up auditor independence is evident in the provisions of the Sarbanes-Oxley Act of 2002 (SOX). To date, there has been little empirical evidence gathered to determine whether SOX provisions have actually enhanced financial reporting quality. Further, although the actions of regulators suggest that they subscribe to the theory suggested by DeAngelo (1981) that auditor quasi-rents found in non-audit fees potentially impair auditor independence and reduce financial reporting quality, research has provided mixed evidence in support of this assertion. Results of cross-sectional tests suggest that SOX mandates have been effective -- financial reporting quality has improved. Further, changes in non-audit fees are found to be negatively associated with changes in discretionary current accruals. Non-audit fees at a point in time are not found to be associated with changes in measures of financial reporting quality.

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