Impact of Section 201 of SOX on the Relationship between Audit and Non-Audit Fees

Abstract

This study aims to investigate the changes that the prohibition of the non-audit services by section 201 of SOX brought in the relationship between the audit fees and non-audit fees. Both univariate and multivatiate regression methodologies has been used to test the hypotheses. Using both OLS and two-stage least squares, this study find a weak positive relationship between audit fees and non-audit fees. This result suggests that the companies need to pay an increased rate of both audit and non-audit fees after SOX. The findings of this paper will be the use of financial reporting regulatory authorities such as Public Company Accounting Oversight Board (PCAOB). It will also guide the researchers for future investigations. This study will be the one of the first to provide evidence on the changes in the relationship between audit and non-audit fees because of the Section 201 of Sarbanes-Oxley Act.