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Differential spillover effects of different non-audit fees on audit report lag

Kam-Wah Lai (Chu Hai College of Higher Education, New Territories, Hong Kong)

Journal of Applied Accounting Research

ISSN: 0967-5426

Article publication date: 10 March 2022

Issue publication date: 13 January 2023




Regulators treat all non-audit services the same by using a broad-brush approach which is reflected in the study of total non-audit fees in the same analyses or different non-audit fees in isolation by prior studies. To know whether the non-audit services have different effects and hence, should be regulated separately, this paper compares their effects on audit report lag and examines whether they follow the implied hierarchy of the Securities and Exchange Commission.


The effects of audit-related non-audit fees, tax fees and other non-audit fees are compared in an audit report lag model to determine whether they are the same statistically. Supporting tests for audit quality use discretionary accruals and the reporting of a small profit or small positive change in profit.


This paper finds that different non-audit fees do not have the same effects on report lag and partial support for the implied hierarchy of the Commission. Specifically, for large accelerated filers, audit-related fees and tax fees have the same negative effects on report lag but other non-audit fees are unrelated to report lag. Tests of audit quality suggest that auditors do not compromise audit quality.

Research limitations/implications

Different non-audit services are unique in their spillover effects and deserve individual attention. Audit practitioners could be more comfortable in providing audit-related non-audit or tax services for audit clients since these services could facilitate audit work without compromising independence. On the other hand, they should be cautious about the provision of other non-audit services because the services do not enhance the efficiency of audit work and without such a benefit to audit clients, the provision may create issues of perceived independence.

Practical implications

Insight is limited by the types of disclosure of non-audit fees available and the lack of internal measures of audit efficiency.


The results provide deeper insight into the knowledge spillover theory and prior studies which implicitly assume all non-audit services having the same effect. The results suggest that the services should be regulated each on its own but not in a bundle. Last, this paper provides the first evidence that audit-related non-audit fees reduce report lag.



Data Availability: Data are publicly available from sources identified in the paper.

Funding: The author acknowledges financial support from the Research Grants Council of the Hong Kong Special Administrative Region, China (under project no. UGC/IDS13/16).


Lai, K.-W. (2023), "Differential spillover effects of different non-audit fees on audit report lag", Journal of Applied Accounting Research, Vol. 24 No. 1, pp. 1-24.



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