| Summary: | 碩士 === 元智大學 === 會計學系 === 93 === Since the beginning of 2002, Enterprises like Enron and WorldCom etc. went bankruptcy because of the fraudulent in their financial statements, which leads to their employees’ and investors great loss. In these bankruptcy cases, the market participants found that the proportion of non-audit services fee were usually more than half of the total audit fees. They wondered if auditors provide non-audit service to their auditees, the auditors’ independence would be impaired. This paper is based on the American market, using S&P 500 companies as the sample firms, and examines the relation between non-audit fees and earnings management and between non-audit fees and market-based returns respectively.
The empirical result indicates that non-audit fees have significant positive relationship with earnings management, and significant negative relationship with market-based returns. It suggests that the more non-audit fees, CPA firms have higher tolerance for earnings management. This is because auditors may have more pressure from their clients, or would like to earn specific quasi-rent when providing non-audit services to auditees. The market-based returns would be decreased as the proportion of non-audit fee because market participants consider that the more non-audit fees, the more harmful to auditors’ independence.
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