The interdependence between market structure and the quality of audited reports: the case of non-audit services

• 成果类型: Article
• 署名作者: Bleibtreu, Christopher; Stefani, Ulrike
• 署名单位: BI Norwegian Business School; University of Konstanz
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-022-09734-9
• 发表日期: 2024
• 页码: 1524-1574
• 关键词: FIRM INDUSTRY SPECIALIZATION; earnings management; strategic dependence; corporate governance; Knowledge spillover; Cournot competition; joint determination; client importance; LITIGATION RISK; fees

摘要

This paper addresses the effects of a prohibition of providing non-audit services (NAS) to audit clients. By combining a strategic auditor-client game with a circular market-matching model that has an endogenous number of auditors, we take into account the interdependence between the auditors' and clients' incentives, the market structure, and the quality of audited reports. We show that the regulation's effects depend on the preexisting audit market concentration and the types of blacklisted NAS. In sharp contrast to the effects that regulators desire, a prohibition of providing NAS to audit clients can further increase audit market concentration and decrease the quality of audited reports if the fees that auditors previously earned from providing the blacklisted NAS were relatively high, compared to the reduction in audit costs that result from spillovers. In contrast, a prohibition of the NAS that generate intense spillovers and low NAS fees can have the unexpected-but desired-effect of decreasing market concentration; however, reporting quality also decreases.