Do Former Audit Firm Partners on Audit Committees Procure Greater Nonaudit Services from the Auditor?

• 成果类型: Article
• 署名作者: Naiker, Vic; Sharma, Divesh S.; Sharma, Vineeta D.
• 署名单位: Monash University; University System of Georgia; Kennesaw State University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50271
• 发表日期: 2013
• 页码: 297-326
• 关键词: CORPORATE GOVERNANCE; joint determination; fees; INDEPENDENCE; BOARD; expertise; OFFICERS; QUALITY; ALUMNI

摘要

To address potential threats to auditor independence, the Sarbanes-Oxley Act of 2002 (SOX) requires the audit committee to pre-approve nonaudit services (NAS) procured from the auditor. However, the presence of a former audit firm partner (FAP) affiliated with the current auditor on the audit committee could undermine the audit committee's due diligence over the NAS pre-approval process. To alleviate such concerns, the Securities and Exchange Commission approved a three-year cooling-off'' period for appointing audit firm alumni as independent directors. Our analyses show that the presence of both affiliated and unaffiliated FAPs on audit committees does not lead to greater NAS procured from the auditor; rather, FAPs reduce NAS procured from the auditor. Moreover, NAS decline significantly following the appointment of FAPs to the audit committee. Further tests suggest the three-year cooling-off period may not be warranted and deserves further investigation. Our study raises important implications for regulators, policy makers, corporate boards, and future research.