Are audit partners’ compensation and audit quality related to their consulting revenues? |
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| Institution: | 1. Peking University, HSBC Business School, China;2. BI Norwegian Business School, Norway;3. Umeå School of Business, Economics and Statistics, Sweden;1. School of Business, University of Connecticut, 2100 Hillside Rd., Unit 1041A, Storrs, CT 06269, United States;2. College of Business, Colorado State University, 501 W. Laurel St., Fort Collins, CO 80523, United States;1. College of Business, City University of Hong Kong, 83 Tat Chee Avenue, Kowloon, Hong Kong;2. School of Business, Hong Kong Baptist University, 34 Renfrew Road, Kowloon, Hong Kong;3. Faculty of Business, Lingnan University, 8 Castle Peak Road, Tuen Mun, Hong Kong;1. School of Accountancy, Central University of Finance and Economics, Beijing 100081, China;2. SKEMA Business School, 99 Ren’ai Road, Suzhou 215123, China;1. School of Economics, Zhejiang University of Technology, Hangzhou, Zhejiang, China;2. College of Business, University of Rhode Island, Kingston, Rhode Island, U.S.A., and School of Business, Sun Yat-Sen University, Guangzhou, Guangdong, China;3. Lingnan College, Sun Yat-Sen University, Guangzhou, Guangdong, China;4. School of Economics and Management, Tongji University, Shanghai, China;1. College of Business & Public Management, Wenzhou-Kean University, Wenzhou, Zhejiang, China;2. School of Economics and Business, SUNY Oneonta, Oneonta, NY 13820, United States;3. BYU Marriott School of Business, Brigham Young University, Provo, UT 84602, United States;4. Shidler College of Business University of Hawaii at Manoa, Honolulu, HI 96822, United States;1. Data & Text Mining Laboratory, Jerusalem School of Business Administration, Israel;2. Rutgers Business School – Newark and New Brunswick, Rutgers University, Department of Accounting and Information Systems, United States;3. Stern School of Business Administration, New York University and, QMA LLC, United States;4. Freeman College of Management, Bucknell University, United States |
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| Abstract: | Recent accounting scandals have triggered renewed interest in the debate concerning whether audit firms should be banned from providing consulting services. Compared to the voluminous studies on consulting services to audit clients (i.e., non-audit services, hereafter NAS), little has been done to investigate consulting services to non-audit clients (hereafter CS). This study examines whether audit partners' revenues from CS are associated with: i) partners' compensation, and ii) audit quality (AQ), while controlling for revenues from NAS and auditing. We choose the Norwegian setting because of the unique and proprietary data on CS at the audit partner level. Our results provide initial evidence that partners' compensation is positively associated with their revenues generated from CS. Regarding AQ, our findings indicate no relation between AQ and partners' revenues from CS. This study contributes to the recent debate on multidisciplinary audit firms and should be of interest to regulators, audit firms, and users of audited financial statements. |
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| Keywords: | Consulting services Non-audit clients Partner compensation Audit quality M42 |
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