Pricing on Andersen's FIS and internal audit services by successor auditors

Ho Young Lee (University of Nebraska – Omaha, Omaha, Nebraska, USA)

Managerial Auditing Journal

ISSN: 0268-6902

Publication date: 1 December 2005

Abstract

Purpose

To examine whether or not new auditors of former Andersen clients perceive prohibited non‐audit services from Andersen as a business risk indicator and, therefore, adjust for the effects of this important risk factor in their audit pricing.

Design/methodology/approach

Utilizing a significant number of involuntary auditor switches in the US as a result of the collapse of Andersen in late 2002, this study uses regression analyses to examine the hypothesized associations between two types of non‐audit services and successor auditors' audit pricing.

Findings

This study finds that the provision of financial information systems (FIS) design and implementation services and internal audit outsourcing services are positively associated with audit fees charged by successor auditors. This study supports the recent prohibition on the provision of FIS and internal audit services mandated by the Sarbanes‐Oxley Act of 2002.

Originality/value

This study adds to the recent body of work on the association between the provision of certain non‐audit services and the predecessor auditor independence or audit quality perceived by the successor auditor and provides valuable information for policy makers.

Keywords

Citation

Young Lee, H. (2005), "Pricing on Andersen's FIS and internal audit services by successor auditors", Managerial Auditing Journal, Vol. 20 No. 9, pp. 970-980. https://doi.org/10.1108/02686900510625316

Download as .RIS

Publisher

:

Emerald Group Publishing Limited

Copyright © 2005, Emerald Group Publishing Limited

Please note you might not have access to this content

You may be able to access this content by login via Shibboleth, Open Athens or with your Emerald account.
If you would like to contact us about accessing this content, click the button and fill out the form.
To rent this content from Deepdyve, please click the button.