Characteristics of non-audit services to auditor independence

Share on facebook
Share on google
Share on twitter
Share on linkedin
Illustration by ACT Consulting

The development of research related to the impact of non-audit services on auditor independence has been carried out by Simunic and reviewed by Francis, Schneider reflected the importance of studying this issue further. The problem in Malaysia is that the relationship between non-audit services and earnings quality is ambiguous. Che Ahmad and Abdul Wahab examined the relationship between non-audit services, audit fees and audit opinions. However, globally, the same problem lies in the limited data presented in determining the impact of various characteristics of non-audit services as carried out by Alexander and Hay.

Previous research conducted by Beck and Schneider argued that repetitive non-audit services provide an abundance of knowledge and can damage auditor independence. The study then looked at the research gaps that had to be resolved: investigating the relationship between auditors’ non-audit services and accrual quality in Malaysia, investigating the impact of non-audit service types on accrual quality, examining the nature of these services, whether they were repeated or non-repeatable, and their impact on accrual quality, type testing and repetition of these services simultaneously.

This study conducted observations on 1,117 companies in Malaysia in the period 2009 to 2011 using the Francis accrual model. This study used several variables of Srinidhi and Gul and Causholli, accruals as a proxy for audit quality or loss of independence, and also involved company performance and the characteristics of the auditors as well. The study found that non-audit services negatively and significantly affect the quality of accruals by increasing estimation errors, which indicate that non-audit services create economic ties, which can affect auditor independence. The findings of this study support the research conducted by Srinidhi and Gul, who found that the fees paid to auditors affect the quality of accruals. This study found that all types of non-audit services negatively and significantly affected the quality of accruals. Interestingly, non-recurring and non-recurring costs affect the quality of accruals negatively and significantly.

Therefore, this study provides suggestions for improvements to the rules of the Malaysian Institute of Accountants (MIA) which focuses on auditor independence and can assist other regulatory bodies in ensuring better governance in the provision of non-audit services. This research contributes to the literature conducted by Alexander and Hay, Paterson and Valencia, and Abdul Wahab about the role of non-audit services and how they affect the quality of accruals.

Author: Iman Harymawan Details of this research available at:

Abdul, W. E. A., Majid, W. Z. N. A., Harymawan, I., & Agustia, D. (2020). Characteristics of auditors’ non-audit services and accruals quality in Malaysia. Pacific Accounting Review.

Related News



Media komunikasi dan informasi seputar kampus Universitas Airlangga (Unair).

Leave Replay

Close Menu