Keywords: empirical evidence of non-audit service independence norms
Since 1970s, fierce market competition has provided a good opportunity for the development of non-audit services, which have gradually become the most potential value-added services. At the same time, however, the rapid development of non-audit services has aroused fierce debate: one view is that non-audit services can open up business space, increase profits, improve audit efficiency, attract outstanding talents, meet customer needs and disperse audit risks; Another view is that non-audit services strengthen the economic relationship between certified public accountants and audited units, and damage the independence of auditing. The focus of the debate is whether non-audit services damage audit independence.
Firstly, this paper summarizes the previous achievements from two aspects: normative research and empirical research, and then puts forward my own views on the basis of the previous achievements.
I. Normative research
(A) non-audit services have a great impact on audit independence.
1. and Cai (2009) studied the influence of non-audit services on audit independence from the perspective of rent-seeking theory. They believe that the rent-seeking activities of the management of the audited entity and the certified public accountants have played an important role in the influence of non-audit services on audit independence, and its harm is obvious: first, rent-seeking activities will lead to the damage of audit independence and the objectivity and fairness of the certified public accountants industry, resulting in chaos in China's audit market; Secondly, audit rent-seeking will seriously affect the audit quality and audit function, and the decline of audit quality will in turn lead to the distortion of resource allocation and increase the production cost of society; Thirdly, this kind of rent-seeking activity, like other rent-seeking behaviors, is easy to cause waste of social resources and loss of social welfare; Finally, rent-seeking activities will distort the income distribution pattern, affect social equity and have a negative impact on the development of the audit industry.
2. Yan Jungang (2009) explained the great influence of non-audit services on audit independence from the perspective of the self-interest of accounting firms and certified public accountants: the high fees of non-audit services easily lead to the loss of independence of accounting firms due to profiteering; The income of certified public accountants is determined by the quality of services they provide (especially the quality of non-audit services such as consulting services), and the quality of services depends on whether they can bring benefits to the audited entity or help the audited entity succeed. In this way, it is easy for the public to doubt the independence of certified public accountants relative to the audited units. Secondly, the implementation of non-audit services can easily lead to self-evaluation, thus affecting audit independence.
3. Xu Hua (2007) analyzed the threat that the implementation of non-audit services may pose to audit independence from the basic theoretical level of audit independence. He pointed out that the substantive independence of certified public accountants who provide audit and non-audit services to the same customer will be affected by threats of economic interests, self-evaluation, intimate relationships and coercion.
4. Qiu Jing (20 10) put forward the viewpoint from the perspective of principal-agent theory: the existence of some non-audit services (mainly non-authentication services, such as consulting services and tax services) changed the original equilibrium relationship, changed two agents who had no economic interests into stakeholders, changed the original one-way agent into a two-way agent, and changed the registered accountant from the original detached and independent third person into a double trustee. Therefore, from the formal point of view, the provision of some non-audit services has broken the original triangular balance relationship, and the original one-way entrustment has become multiple entrustment, which will lead to the possibility of collusion between operators and certified public accountants and harm the interests of the principal, that is, the owner. This multiple entrustment process blurs the audit relationship generated by the fiduciary responsibility, and the audit independence of certified public accountants is questioned, at least in form. However, if most of the income of certified public accountants comes from prospective users who are mainly owners, certified public accountants will not lose their audit business because of small losses and non-audit services from secondary sources of income. Therefore, whether non-audit services substantially damage audit independence depends on whether the economic benefits of providing non-audit services exceed the possible losses caused by the loss of independence of certified public accountants.
(b) Non-audit services have little or no impact on audit independence.
1.Axclson (1965) should be the first scholar to publish articles on non-audit services and audit independence. Starting from the service of management consulting, he thinks that certified public accountants are only providers of consulting opinions in management consulting services, not decision makers. Whether or not to adopt the advisory opinion in the end is still decided by the management organ of the audited entity. Certified public accountants provide management consulting services to audited units, which has little impact on audit independence.
2. Deng Dehong (2009) found from the perspective of rational brokers that non-audit services will not affect the audit quality. He believes that certified public accountants have the inherent economic motivation to maintain audit independence based on the market. Under the current institutional arrangement, the cost of CPA's moral failure includes at least two parts: first, the loss of reputation, that is, if CPA loses its principles to a customer, it may lead to the loss of CPA's reputation and market share; The second is litigation loss, that is, litigation compensation caused by audit failure caused by dereliction of duty. The increasing amount of litigation compensation has increased the practice cost of certified public accountants. As long as the income of non-audit service does not exceed the cost of moral failure, under the balance of cost and income, CPA, as a rational economic man, will remain independent.
3. According to the theory of knowledge spillover effect, Fang Hao (2007) proposed that knowledge gained by providing non-audit services may "spill over" to audit service products, thus reducing the cost of audit services, improving the efficiency of audit service products and reducing audit costs. By providing non-audit services, certified public accountants can have a deeper contact and understanding of customers' business conditions, business plans and management operations, and greatly enhance the effectiveness of auditing. This positive role is far higher than formal independence.
Second, empirical research.
(A) non-audit services have a great impact on audit independence.
1. Chen Guohui and Wang Junfa (2008) conducted a multiple regression analysis on the degree of non-audit services and earnings management of audit clients in China, and found that whether accounting firms provide non-audit services to listed companies has an impact on earnings management of listed companies at the level of 5%. Non-audit service income accounts for less than 5% of the total income of accounting firms in China. On the surface, this figure is not enough to affect the audit independence of certified public accountants. However, through the empirical study of Shenzhen Stock Exchange in Chen Guohui and Wang Junfa in 2006, we find that non-audit services are positively related to earnings management of listed companies, and the independence of accounting firms providing non-audit services will be damaged to some extent.
(b) Non-audit services have little or no impact on audit independence.
1. Chen Lirong (2008) empirically studies and analyzes the influence of non-audit services on audit independence from the perspective of agency cost. He believes that in China, major shareholders and creditors are indifferent to whether agents buy non-audit services and whether non-audit services affect audit independence; As the actual controller and certified public accountant of the enterprise, the management believes that by purchasing non-audit services from on-the-job certified public accountants, the cost can be reduced, the quality of financial information can be improved, and the audit report can be more authentic. This is his preliminary verification of the influence of non-audit services on audit independence. Then, from the perspective of non-audit service pricing, the influencing factors of non-audit service pricing are analyzed by multiple regression through extended Barkess and Simnett models. Further verification shows that: in listed companies in China, the establishment of audit committees will reduce the purchase of non-audit services by management; The audit period, the types of audit opinions in the previous period and the current period, the size of the firm, the size of listed companies during the audit period, the financial status of listed companies and the industry in which listed companies are located have no important influence on the pricing of non-audit services; There is no significant difference in the pricing of non-audit services. Audit fees have a significant positive impact on the pricing of non-audit services, indicating that accounting firms have not reduced the collection of non-audit fees because of high audit fees, and there is no trade-off relationship between them. On the contrary, they may charge higher non-audit fees because they provide audit services and know more about the actual situation of enterprises. Both of these studies are based on the influence of non-audit services on the independence of audit forms.