The relationship between categories of non-audit services and audit fees: evidence from UK companies

Ezzamel, M., Gwilliam, D.R. and Holland, K.M. (2002) The relationship between categories of non-audit services and audit fees: evidence from UK companies. International Journal of Auditing, 6 (1), 13-35. (doi:10.1111/j.1099-1123.2002.tb00003.x).

Record type: Article

Abstract

Using survey data we examine the relationship between various categories of non-audit services and audit fees. Compared to previous research, we use a more refined classification of non-audit services both for incumbent and non-incumbent auditors, and control for the existence of an internal audit function and basis of disclosure. Our results suggest that the relationship between levels of audit fees and non-audit services varies by category of non-audit service. These results support explanations of the positive association between fees paid for non-audit services and audit fees in terms either of client specific differences, e.g. organisational complexity, or of events giving rise to the purchase of more audit and non-audit services rather than in terms of direct economic linkages between the cost functions for audit and non-audit services. We speculate that the presence of another auditing firm at the client in a consulting capacity may exert competitive pressure on the fee for external audit.

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