Non-audit fees and auditor independence: Nigerian evidence

Abstract

Purpose

This study aims to investigate the extent to which the provision of non-audit services (NAS) by external auditors to audit clients affects auditors’ independence and the audit expectation gap in Nigeria.

Design/methodology/approach

The study adopts an interpretivist approach. In total, 30 semi-structured, face-to-face interviews were conducted to explore the views expressed by audit partners and pension fund managers in Nigeria; group responses were evaluated and presented separately. After transcribing the interview audio recordings, a thematic data analysis of the two groups’ responses was performed.

Findings

Interpretation of the interview responses indicates that the provision of NAS by audit firms to their audit clients is regarded by auditors as a matter of economic necessity. Nevertheless, it is also perceived as impeding auditors’ independence and increasing the gap between the auditor and public expectations.

Practical implications

This study contributes to the debate surrounding the need for an independent body to oversee auditing standard setting distinct from the current practice to enhance transparency.

Originality/value

A qualitative analysis of the nuanced responses obtained from the semi-structured interviews reveals starkly the perceived economic pressures on auditors to accept non-audit work. Moreover, it endorses the regulation to restrict non-audit work in support of a sustainable fee level for an independent audit.

Citation

Onulaka, P.N., Shubita, M.F. and Combs, A. (2019), "Non-audit fees and auditor independence: Nigerian evidence", Managerial Auditing Journal, Vol. 34 No. 8, pp. 1029-1049. https://doi.org/10.1108/MAJ-06-2017-1576