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The Effect of Non-Audit Services on Auditor Independence: A study on 11 food retail- and wholesale companies in the United Kingdom
Jönköping University.
Jönköping University.
2016 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Purpose – The purpose of this study is to investigate the effect of non-audit services on auditor independence, and the importance of non-audit services as a source of income for audit firms in the United Kingdom. Design/method/approach – This study will examine 11 companies in the food retail- and wholesale industry during 2007 - 2014. Five indicators have been used; (1) Appointed auditor and provision of non-audit services to audit clients; (2) Auditor tenure; (3) Non-audit services in relation to total services; (4) Tax-services in relation to non-audit services, (5) Big Four’s revenue. Information has been collected using the quantitative approach through annual- and transparency reports. The threshold used to measure possible independence threats (self-review-, self-interest- and familiarity threat) has been set at 18,5 %. Findings – This study concludes that the jointly provision of audit- and nonaudit services possibly causes impairment of auditor independence, and that non-audit services is an important source of income for audit firms. The findings showed that in 99 %, companies purchased non-audit services from their statutory auditor. Non-audit services in relation to total services surpassed the threshold in 78 % of all financial years. Likewise, tax-services in comparison to non-audit services exceeded the threshold in 65 % of all financial years. The Big Four’s revenue from non-audit services to audit clients in relation to total revenue is almost constantly below the threshold. However, in all financial years except from one, total revenue from non-audit services surpassed revenue from audit services by far. Contribution – The study contributes to the ongoing discussion about nonaudit services effect on auditor independence. Originality/value – This study is one of few that provide detailed information about non-audit services in the food retail- and wholesale industry. It highlights social and ethical issues with regard to agency relationships.  

Place, publisher, year, edition, pages
2016.
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-30239ISRN: JU-IHH-FÖA-2-2016-0188OAI: oai:DiVA.org:hj-30239DiVA, id: diva2:933319
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Available from: 2016-06-07 Created: 2016-06-03 Last updated: 2025-10-13Bibliographically approved

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CiteExportLink to record
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Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf