Abstract

Many prior studies investigated whether non－audit services impair auditors' independence. But they didn‘t provide consistent results. Especially, in Korea, most studies show that there's no evidence that auditors' independence are affected by non－audit services. However, the results of these prior research are likely to be subject to the bias, because they didn't consider explicitly the endogeneity(Antle et al., 2002) among audit fees, non－audit fees, and discretionary accruals. In addition, although non－audit services might impair auditors' independence, the level of impairment can be different to the extent which the firm's corporate governance is high or low(Larcker and Richardson, 2003). But, most prior studies didn't consider the effects of the corporate governance on the relation between non－audit services and auditors' independence. According to the mentioned above, the paper is to examine more clearly the relation between non－audit services and auditors' independence, controlling for 1) the endogeneity among audit fees, non－audit fees, and discretionary accruals, and 2) the effects of the corporate governance on the relation. The results show that, in most cases, the absolute values of discretionary accruals are likely not to be increased although the level of the corporate governance is low. These results are consistent with the results of prior research that auditors' independence is not impaired by non－audit services and, in addition, shows that the prior results are not changed after controlling for the endogeneity among audit fees, non－audit fees, and discretionary accruals, and the effects of the corporate governance on the relation between non－audit services and auditors' independence.

Keywords

• Non－audit services
• Auditors' Independence
• Audit fees
• Non－audit Fees
• Endogeneity

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