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Non-audit Fees and Auditor’s Propensity to Issue Going Concern Opinions: Extensions and Refinements
Ferdinand A Gul,
The Hong Kong Polytechnic University
Kam - Wah Lai, The Hong Kong Polytechnic University
ABSTRACT. This study using DeFond et al. (2002) (hereafter DRS) as a benchmark, first explores whether the relationship between non-audit service (NAS) fees and auditor’s propensity to issue going concern audit opinions could be non-linear. We expect a non-linear relationship because the association between NAS and auditor independence could be affected by firms’ characteristics. The results using a sample similar to DRS show that the relationship between NAS fees and the auditor’s propensity to issue a going concern opinion is non-linear. However, similar to the DRS study, no significant results are obtained for the fee ratio, total fees or audit fees. Further analyses suggest that the non-linear relationship is likely to be moderated by firm size and Big 5 auditors. Results also show that firms with high NAS fees are likely to be smaller and employ Big 5 auditors.
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