Effects of Non-Audit Services on Auditor Independence

Abstract

This Chapter investigates the effects of providing non-audit services on auditor independence in fact and in appearance. Section 5.1 examines how the provision of non-audit services affects each of the economic causes or factors, whose effect on independence in fact was examined generally in Chapter 3, and explains the empirical evidence relevant to forming a judgement on the matter. The conclusion of this dual examination is that independence in fact is not prejudiced by the provision of non-audit services—rather it may be strengthened, particularly in firms with a diversified clientele. Section 5.2 then discusses the accumulated empirical evidence regarding the apparently negative effects of providing non-audit services on the appearance of independence. Finally, Section 5.3 explains the principal safeguards adopted by professional bodies and firms to ensure quality, avoid conflicts of interest and improve the perception of independence in the field of non-audit services.