| Summary: | 碩士 === 銘傳大學 === 會計學系碩士班 === 96 === This paper tests the relation of non-audit services (NAS) and accounting firm size on the value relevance of earnings (measured as ERC). The hypothesis is based on the provision of NAS by the same auditor is likely to adversely affect investors’ perceptions of the credibility of financial reports. Big 4 auditors due to reputational capital and litigation costs are likely to provide higher quality audit, then it likely to mitigate the adverse effects of NAS. Our sample use 3373 observations of Taiwan TSE and OTC firms from 2003-2005, and the hypothesis is tested by running several cross sectional regression models with interaction terms with control variables.
The results show whether before or after Procomp Informatics Scandal, provisions of NAS are significantly negative associated with value relevance of earnings in divided samples. It indicates provide NAS will impair independence of CPA, effect investor confidence, then lower value relevance of earnings. The value relevance of earnings of firms which audited by big 4 are significantly higher then non big 4. However, after Procomp Informatics Scandal, the accounting firm size is not positively associated with ERC. It indicates that the reputations of Big 4 suffer huge damage. Investors doubt the quality of Big 4 auditors. Besides, NAS and accounting firm size are positively associated with ERC, and it shows the inverse relationship of NAS is weaker for Big 4 auditors.
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