Auditor independence and reforms of non-audit services: Evidence from the UK

Stuart Turley, Shahidul Islam, Javed Siddiqui

Research output: Contribution to conferencePaperpeer-review


This paper examines the impact of non-audit services on auditor independence in the regime following the 2004 introduction of new regulations, in the form of Ethical Standards for auditors in the United Kingdom. Employing three different measures of the auditor’s economic dependence on clients, the study finds evidence in support of the hypothesized link between two of the three measures and discretionary accruals in reporting companies. Extending the investigation, the study also tests whether a threshold level for the relative amounts of audit and non-audit service fees can distinguish between the circumstances when independence may be weakened and when it is not. The results reveal evidence of higher discretionary accruals when the level of non-audit service fees reaches a level of 150% of audit fees but that this relationship is not present when the level rises above 200%, suggesting that auditors may be more conscious of the potential threats to perceived independence when NAS reach this higher level. The study thus provides some evidence in support of the hypothesis that higher NAS fees and total fees to the auditor are positively correlated with the magnitude of discretionary accruals, but also that this relationship is more complicated than implied by a linear regression. The findings add to those of prior studies which have employed accruals based measures of audit quality to test the effect of joint audit and non-audit service provision. The paper also makes a contribution to the continuing policy debate over joint provision reflected in consultations and commentaries on regulation in this area such as the European Commission 2011 proposals for a ban on NAS provision to public interest entity audit clients in Europe and similar discussion in the 2009 report of the UK parliamentary Treasury Select Committee.

Auditor independence and non-audit services: evidence from the United Kingdom. Available from: [accessed Aug 18, 2017].
Original languageEnglish
Publication statusPublished - 15 Sept 2011
Event6th European Auditing Research Network (EARNet) Symposium - Norwegian School of Economics and Business Administration (NHH), Bergen, Norway
Duration: 16 Sept 201117 Sept 2011


Conference6th European Auditing Research Network (EARNet) Symposium


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