Non-audit services provided by audit firms have been a popular scientific topic within the fields of audit and accounting research over the past decades. Numerous researchers have attempted to provide a theoretical contribution by examining different ways of measuring the concepts of audit quality and financial reporting quality. The resulting consequences are mixed results and a lack of consensus among researchers from both research fields. The two, in other situations, rather distinctive research fields of audit quality and financial reporting quality, have, in several cases, been confounded without analytical reflection regarding their differences. In parallel to the scientific progress, regulatory bodies have noticed the increasing trend of non-audit services and how they constitute larger portions of the audit firm’s annual revenues. Their responses have been legal restrictions, both in the US and Europe, in order to cease the trend. The purpose of this thesis is to make a pronounced investigation regarding the relationship between non-audit services and financial reporting quality in Swedish private firms. Furthermore, it will also be of interest to examine if this proposed relationship is moderated by the presence of the four global market-leading audit firms or not. The study is based on a deductive approach and a quantitative research strategy, to collect and analyze data from annual reports. To fulfill the purpose of the study, the data is analyzed by conducting binary and multinomial logistic regression tests. The results suggest that there is an association between certain types of non-audit services and financial reporting quality. Specifically, services that are unrelated to tax have proven to be statistically significant positively correlated with financial reporting quality. No evidence was found supporting a moderating effect by the characteristics of audit firms, suggesting that the choice of an audit firm is irrelevant for attaining high financial reporting quality when purchasing non-audit services. The study’s theoretical contribution is the novelty arising from the combination of studying non-audit services’ impact on financial reporting quality within a Swedish setting on private firms. The study also provides empirical contribution by using a proxy for financial reporting quality rarely used in previous research. The findings are of practical importance since they suggest that firms potentially benefit in their financial reporting by purchasing these kinds of services, which contradicts past actions made by regulatory bodies.

The faith in financial reporting quality and the corresponding auditing process has suffered a lot within the last decade, due to significant accounting scandals (e.g. Enron, WorldCom, Parmalat, etc.). As an answer to these accounting scandals, the law-makers in Germany and the European Union, respectively, have strengthened audit regulations in order to improve the quality of the conducted audits. The aim of this cumulative dissertation is to provide empirical evidence on the effects of intended and already implemented regulative audit requirements in Germany. ln order to consider the wide range of different audit requirements, the dissertation is based on four different study manuscripts, highlighting various perspectives with regard to the appointment, duration, and remuneration of a statutory auditor in the German audit environment. Besides the empirical evidence for separate auditing issues, this dissertation is also aimed to provide a solid theoretical background and critical suggestions for future research.:I. Audit services, non-audit services, and audit firm tenure – three perspectives on audit quality … 1 II. Abnormal audit fees and audit quality in German audit market: initial evidence on association of audit fee premiums and audit fee discounts with earnings management … 13 III. Effects of initial audit fee discounts on audit quality: evidence from Germany … 32 IV. Non-audit services and audit quality: blessing or curse? … 60 V. Relationship of auditor tenure to audit quality: empirical evidence from the German audit market … 89

Bakgrund: I slutet av 2019 upptäcktes coronaviruset vilket föranledde den pandemi vi befinner oss i än idag. Tidigare studier visar på att en kris likt coronapandemin kan innebära förändringar hos revisorers oberoende. Olika företagsskandaler och andra kriser har inneburit att revisionslagar och regler kopplade till revisorers oberoende fått genomgå förändringar. Många tidigare studier belyser en ökad press hos revisorerna i samband med kriser likt coronapandemin. Syfte: Studiens syfte är att utreda hur revisorers oberoende har blivit påverkat av coronapandemin och om pandemin lett till en påverkan på revisorernas förmåga att följa principer och lagar. Metod: Vid datainsamlingen i studien har kvalitativ metod använts. Studien gjordes genom semistrukturerade intervjuer med auktoriserade och erfarna revisorer. Urvalet bestod av revisorer med lång erfarenhet vilket innebar att de arbetat med revision både innan och under coronapandemin. Resultat och slutsats: Studiens resultat visar på att revisorers oberoende har varit opåverkat under coronapandemin men att andra faktorer under revisionen har påverkats. Faktorer så som arbetssättet och att fler uppgifter tillkommit. I empirin framkom det att de intervjuade revisorerna ändå har upplevt en ökad press bland annat i bedömningen om företags fortsatta drift. Många företag har haft det tufft i coronapandemin vilket har lett till att revisorer fått medverka i en del obekväma diskussioner med klienter men enligt revisorerna har det ändå inte påverkat deras oberoendeställning. Det framkom också att revisorerna inte såg en ökad risk för vänskapshot när revision sker på distans. Slutligen har revisorerna fått i uppdrag att granska olika stödåtgärder under pandemin. Dessa granskningsåtgärder kan anses gynna revisionens roll som ett legitimitetsstärkande verktyg för företag. / Background: The COVID-19 virus was first observed in late 2019. This virus has set the stage for the pandemic situation we still are living in today. Earlier studies show that a crisis like the COVID-19 pandemic may result in changes in auditor independence. Different business scandals as well as other crises has resulted in changes in auditing laws and regulations connected to auditor independence. Several studies also express an increasing pressure for auditors during crises such as the COVID-19 pandemic. Purpose: The purpose of the study is to examine how auditor independence has been affected due to COVID-19 and if the pandemic situation has resulted in an effect on the auditors’ ability to follow auditing laws and regulations. Method: In order to collect data a qualitative method has been used. The study used semi-structured interviews with authorized and well-experienced auditors. The sample consisted of experienced auditors who have worked in the field of auditing both before and during the pandemic. Result and conclusion: The result of the study shows that auditor independence has not been affected during the COVID-19 pandemic. The study does however show that other factors of the auditing has been affected. Factors such as changes in working methods and additional work tasks to be completed. In the empirical findings it was shown that the interviewed auditors had been experiencing an increased pressure in connection with their assessment of the companies’ going concern. Many companies have been experiencing a tough economic situation during the coronavirus pandemic, which has led to auditors having uncomfortable discussions with clients. However, according to the auditors interviewed the auditor independence have not been affected. Moreover, the empirical findings show that the auditors did not see an increased risk for familiarity threat when the auditing is held virtually. Lastly, the result of the study show that auditors have taken on the responsibility to revise different support measures during the pandemic. These revisions can be seen as a way of promoting the role of auditing as a tool for companies to achieve legitimacy.

Syfte: Syftet med studien är att skapa en fördjupad förståelse för revisorsrotationens inverkan på revisionskvalitet utifrån ett klientperspektiv.  Metod: Studien bygger på en kvalitativ forskningsmetod. För datainsamling genomfördes nio semistrukturerade intervjuer med ledamöter från styrelser och revisionsutskott i börsnoterade bolag.     Resultat och slutsats: Studien visar att revisionsklienterna upplever att revisorsrotation har en positiv inverkan på revisionskvaliteten. Vidare visar studien att revisorernas kompetens och revisorernas oberoende är de centrala delarna av revisionskvaliteten.      Examensarbetets bidrag: Studien ger en insyn i hur implementeringen av de obligatoriska rotationsreglerna påverkar revisionskvaliteten i praktiken. Till skillnad från tidigare forskning har den här studien fokuserat på hur revisorernas egna klienter upplever att revisionskvaliteten påverkas av revisorsrotation.     Förslag till fortsatt forskning: Ett förslag till fortsatt forskning är att gå djupare in på antalet rotationer som de svenska börsnoterade bolagen varit med om. Här kan framtida forskning studera antalet rotationer av bolagens påskrivande revisor, antal rotationer av revisionsteamet samt antalet rotationer av revisionsbyrå. / Aim: The purpose of this study is to create a deeper understanding of the impact of auditor   rotation on audit quality from a client perspective.       Method: The study is based on a qualitative research methodology. För data collection, nine semi-structured interviews were conducted with members of boards and audit committees of listed companies.     Results and conclusions: The study shows that audit clients perceive auditor rotation as having a positive positive impact on audit quality. Furthermore, the study shows that auditor competence and auditor independence are the key elements of audit quality.   Contribution of the thesis: The study provides an insight into how the implementation of the mandatory rotation rules affects audit quality in practice. In contrast to previous research, this study focuses on how auditors’ own clients perceive audit quality to be affected by auditor rotation.  Suggestion for future research: One suggestion for further research is to go deeper into the number of rotations that Swedish listed companies have experienced. Future research could study the number of rotations of the company’s signing auditor, the number of rotations of the audit team and the number of rotations of audit firms.

Thesis (LLM (Mercantile Law))--University of Stellenbosch, 2009. / The worldwide increase of corporate failures on the scale of Enron and WorldCom has sparked a renewed international trend of corporate governance review. With the external company auditor blamed at least in part for many corporate failures, corporate governance reform also necessitates a review of the statutory regulation of the company auditor. In particular, the lack of auditor independence when auditing clients has been under the legislator’s spotlight. The problems associated with unregulated or poorly regulated auditors are well illustrated by the activities of auditing giant Arthur Andersen. In the US, the Sarbanes-Oxley Act has been promulgated in reaction to corporate failures, imposing many new legislative restrictions on the auditor. The UK has a more tempered, selfregulatory approach. South Africa, following international trends with its recently promulgated Auditing Profession Act and Corporate Laws Amendment Act, has also greatly increased the regulation of auditor independence. The question is now whether these new restrictions in the wake of corporate failures have been the right approach with which to prevent future failures and to provide adequate protection to shareholders. Although the general legislative increase in auditor awareness is welcomed, the efficacy of several provisions in South African legislation can be questioned. Widespread reform has taken place in the appointment and remuneration of the auditor, which now has to be independently determined by the audit committee. In particular, South Africa’s new regulation of non-audit services, and the lack of refined regulation on compulsory auditor rotation as well as the cross-employment of auditors by clients, needs a critical discussion. It is submitted that the discretion of a well-regulated audit committee, combined with increased disclosure and transparency, should be enough to regulate most of the key aspects of auditor independence. Care should be taken to not overlegislate in haste to reform. South Africa needs a flexible and customised approach in this regard.

La thèse explore la question de l’efficacité des comités d’audit en France : les comités d’audit jouent-ils effectivement leur rôle ? La problématique de l’efficacité de ces comités dans le processus d’évaluation du gouvernement d’entreprise demeure importante dans le contexte français, où les textes (notamment les recommandations de la 8ème directive) restent très imprécis. Une première partie expose les critères d’efficacité et le fonctionnement général des comités d’audit à partir d’un état de la littérature et d’une étude empirique sur des données secondaires. Nous examinons de façon approfondie les principaux déterminants de la diligence d’un comité d’audit. Ce problème est examiné dans le cadre d’une relation d’agence et d’asymétrie d’information. Ainsi, notre étude dépasse le cadre de la simple existence d’un comité d’audit (purement formel), pour s’intéresser de plus près à la capacité de ces comités à protéger effectivement les intérêts des parties prenantes et ceci en renfonçant la qualité du contrôle interne et celle du processus de l’audit externe. / Corporate governance in France has developed considerably in recent years. The strengthening of governance procedures is illustrated by the creation of audit committees, which today exist in virtually all listed companies. However, the issue of the audit committee’s effectiveness in the corporate governance evaluation process remains significant in the French context, where the texts (particularly the recommendations of the 8th European Directive) continue to lack clarity. This thesis aims to contribute to our understanding of the “black box” of governance procedures by studying the way that the audit committee’s characteristics affect the extent of reporting on internal control and risk management procedures and on audit fees. It emphasizes that the mere existence of an audit committee is not sufficient; it also needs to be effective. To be effective it must have the necessary means (composition, diligence, and resources). This study therefore looks beyond the simple existence of the audit committee (purely formal) and focuses on attributes related to its composition, its diligence, and the diversity of its members in order to more closely examine the audit committee’s ability to protect stakeholder interests. To do this, we analyze 176 non-financial French listed companies during a period when establishing an audit committee was voluntary. The results obtained support previous works advocating that audit committees comply with best practice rules for expertise,independence, and diligence and be comprised of experienced and diverse members. Our results raise several questions on the scope of the transposition into French law of the 8th European Directive.

Revisorn anlitas för att ge ett oberoende yttrande som ska säkerställa pålitligheten i företagensfinansiella rapporter. Denna tilltrosskapandande effekt kan endast uppnås om revisorn görsina bedömningar och fattar beslut utan att låta sig påverkas av andra personers viljor ellerönskningar. Att revisorn är oberoende är särskilt viktigt i de fall revisorernas arbete påverkarintressenters beslutsfattande. Diskussionen kring revisorns oberoende i samband medtillhandahållandet av fristående rådgivning har debatterats flitigt. Vissa menar att denfristående rådgivningen medför positiva effekter på revisionen, medan andra anser att denborde förbjudas då den utgör ett hot mot revisorns oberoende och påverkar förtroendet förbranschen. Genom införandet av revisionspaketet står revisionsbranschen inför nyaregleringar av oberoendet och den fristående rådgivningen. Denna uppsats ämnar fördjupadiskussionen och undersöka varför det kan upplevas som ett problem när en revisionsbyrå, irollen som oberoende kontrollorgan, erbjuder både fristående rådgivning och revision.Frågeställningen besvaras med hjälp av relevanta teorier, modeller och intervjuer medrevisorer, intressenter samt normgivande organ. Den fristående rådgivningen kan medföra attrevisorn inte uppfattas som oberoende och kan utmana förtroendet hos allmänheten. Vidarekan det upplevas som ett problem när den fristående rådgivningen sker på revisionsklienter.Medias skildring av debatten, att det verkar föreligga ett förväntningsgap samt en bristandetransparens kan även det vara bidragande orsaker till problematiken. Revisionspaketet kankomma att öka transparensen, minska förväntningsgapet samt stärka förtroendet för branschenoch kan således komma att minska problematiken med att ett oberoende kontrollorganerbjuder både fristående rådgivning och revision. / Program: Civilekonomprogrammet

近年來在會計師事務所積極擴張其專業服務版圖的情況下，會計師事務所逐漸發展成橫跨多項專業領域的多元化組織。為對企業營運問題提供完整的解決方案，會計師事務所聘用律師或與法律事務所進行策略聯盟，已是無可避免之趨勢。但會計師事務所對審計客戶提供法律服務則可能衍生出一些新問題，並使外部第三者對其適當性產生疑慮。因此本研究旨在探討當會計師事務所對審計客戶提供法律服務時，財務報表使用者對審計人員獨立性與財務報表可靠性之認知與判斷情形，而研究目的則是驗證法律服務類型、法律公費金額重大性與事務所職員分離程度對財務報表使用者反應的可能影響。 　　研究結果發現，當審計客戶之法律公費構成重大的財務關係時，將顯著影響報表使用者對審計人員獨立性及財務報表可靠性之認知與判斷；另外職員分離程度亦顯著影響報表使用者對審計人員獨立性及財報可靠性之認知情形；但法律服務類型對上述項目之影響則僅為部分顯著。其次，有效保障機制的設計與執行，包括「限制法律服務收入之金額重大性」、「對法律服務公費及服務內容設立強制揭露之規定」、「建立防火牆」與「簽署保密棄權書」等，應有助於維持審計人員之外觀獨立性，並且是財務報表使用者心目中最合理的規範方式。 / In recent years, CPA firms have continued to expand the types of professional services offered both to their audit and non-audit clients and become multidisciplinary organizations. In many cases, they found it necessary to employ lawyers or to enter into strategic alliances with law firms in order to provide complete solutions to business problems. The increase in such arrangements raised new questions and concerns regarding their propriety when legal services were provided to audit clients. This research assessed financial statement users’perceptions of auditor independence and financial statement reliability when a CPA firm offered legal services to its audit clients. The objective was to test financial statement users’reactions to different types of legal services that CPA firms offered to their audit clients, as well as the effects of the materiality of the engagement and the degree of staff separation involved in the provision of such services. 　　Results indicated that a financially material business relationship affected financial statement users’perceptions regarding independence and related judgments of financial statement reliability. The degree of staff separation between auditors and lawyers was also found to affect perceptions of independence and related judgments of financial statement reliability. The type of legal services offered had a lesser effect on responses. This study suggested that with certain mitigating/safeguarding procedures in place, e.g., legal fee magnitude restrictions, legal service disclosure requirements, firewalls, and client waivers, users’perceptions of auditor independence and financial statements reliability may not be impaired when CPA firms provide legal services to their audit clients.

Auditing has an important role in the corporate governance process and is essential in ensuring confidence in the reliability of financial information. It is important to understand the reasons why, given the costs involved, companies change their auditor and choose a particular level of audit assurance. To date, however, only a limited number of studies on auditor choice issues are available, especially in the UK setting. Further, since the downfall of Andersen, the audit market environment has changed significantly, creating a new audit environment to be researched. In light of these recent developments, the objectives of this thesis are to address both concentration and auditor choice issues. It is divided into two separate but interrelated parts. The first part of this thesis provides evidence on audit market concentration in the UK domestic listed company market from 1998 to 2003. The effect of Andersen’s demise on both audit market concentration and audit fees is examined. Using four different size measures (number of audits, audit fees, clients’ total assets and sales), three measures of concentration are calculated. Results show that the UK audit market has now clearly surpassed the tight oligopoly threshold and, despite auditing significantly fewer clients in 2003 than in 1998, the B5/4 managed to increase their fee dominance. In particular, the decline in B5/4 ‘number of clients’ market share was mainly due to their lower share of the newly-listed companies audit market. On the other hand, the slight increase in B5/4 audit fee market share was due to the net impact of leavers concentrating the B5/4 share and joiners diluting it. Voluntary switches to/from the B5/4 had a relatively small impact on B5/4 market share for both measures. Following Andersen’s acquisition by Deloitte & Touche, market levels of audit fee and audit fee rate (audit fee scaled by total assets) have increased markedly, suggesting that more audit effort is being expended as a way to restore confidence about audit quality after the damage caused by Andersen’s alleged misconduct. The acquisition has also contributed to a further increase in ‘audit fee’ market concentration for the 4-firm concentration ratio (CR4) and in the overall Hirschman-Herfindahl Index measure. Although, Deloitte & Touche gained significant market share in terms of both audit fees and number of audits through its acquisition of Andersen, it is PricewaterhouseCoopers that continues to hold the largest market share. Deloitte & Touche retained 93 former Andersen clients (74%), 21 (17%) moved to another B5/4 auditor and 11 (9%) chose a non-B5/4 firm. While former Andersen clients paid higher audit fees, in aggregate, the increase was, perhaps surprisingly, less than for the market as a whole. At the industry level, the B4 firms dominated all sectors, the highest non-B5/4 market share in any industry being just 8%. In 2003, PricewaterhouseCoopers was the leader in 18 out of 34 sectors. The second part of the thesis is divided into two separate studies – auditor change determinants and new auditor selection determinants. These studies use a sample of non financial auditor change companies to test logistic regression models of the determinants of auditor change and new auditor selection. The determinant variables include auditee, auditor and audit characteristics. This part also examines the sensitivity of results to alternative functional forms of the basic model specification. Two definitions of auditor quality – brand name auditor and specialism, are employed. Internal governance issues such as audit committee independence, the duality of chairman/CEO as well as the size/quality of the incumbent auditor were found to be significant determinants of auditor change. Expected future growth in the company, rather than past growth, and audit fee reduction were positively related to audit change probability. Result also suggests that companies changed auditor to improve the perception of auditor independence. By contrast, in the new auditor selection models, corporate governance variables did not appear to be important in determining a different quality (brand-name) auditor. Only the chairman/CEO duality variable was weakly and negatively significant, suggesting that duality is associated with a change to a lower quality auditor. Growing companies are more likely to change to a brand name auditor, consistent with the inability of smaller firms to provide services across an international market. Contrary to agency theory predictions, the results show that a company experiencing increased leverage is less likely to choose a B5/4 auditor, suggesting that B5/4 auditors are being selective in avoiding risky clients. Higher audit fees are paid to new auditors by companies that changed from non-B5/4 to B5/4, reflecting a B5/4 fee premium. However, the higher NAS fee result is contrary to initial expectations. Typically, far fewer variables were significant in the models with audit quality proxied by industry specialism. For the specialism models based on audit fee market share, there is counter-intuitive evidence that a company with a large number of subsidiaries is less likely to move to a specialist auditor from a non-specialist. New specialist auditors were more likely to be preferred when a company experienced an increase in current accruals or a reduction in leverage. In general, the results for these models were less strong and were dependent upon the specialist definition adopted. Finally, the thesis provides evidence that the choice of time variant model (ex-ante, contemporaneous or ex-post) made no significant difference to the overall results. The one exception concerns the ‘growth’ variable, where companies are found to change auditor in anticipation of future growth, rather than as a response to past growth. Further, the use of alternative proxy variables does not greatly influence the regression results. One important exception to this general observation concerns the brand name proxy. When brand name was defined as tier12 (to include Grant Thornton and BDO) the significance level was improved in all models. This suggests that, to some degree, Grant Thornton and BDO are viewed as quality service providers closer in quality to B5/4 than to other smaller audit firms.

本文主要研究支付給審計委員會較多的權益薪酬會不會影響到審計委員會的獨立性，從而支付較低的審計公費，選擇非產業專家的會計師。以2007至2015年間美國的上市公司為樣本，本研究發現審計委員會獲得的權益薪酬與審計公費，產業專家的會計師選擇呈負相關。此結果與預期一致，權益薪酬會誘導審計委員會妥協獨立性，從而買較少，品質較低的審計服務。