The effects of non-audit services on auditor independence: An experimental investigation of supervisory board members’ perceptions

Abstract

Based on the notion that the simultaneous provision of audit and non-audit services (NAS) to clients may endanger auditor independence, current European auditing regulation prohibits the provision of most NAS to audit clients, and limits total fees for NAS (European Parliament and the Council of the European Union, 2014). There is, however, only limited evidence on whether real insiders perceive the provision of NAS as negatively affecting auditor independence. Therefore, this study experimentally investigates the perceptions of German supervisory board members on auditor independence when auditors simultaneously provide NAS and audit services. The results of the study show that the provision of NAS is perceived as having a negative effect on auditor independence. Furthermore, in distinguishing between various forms of NAS, human resource consulting is perceived as having the most negative impact. The results contribute to the debate in the European Union (EU) on whether or not to further restrict the provision of NAS, and help to evaluate the EU regulation aimed at restricting the provision on NAS.