The Relation Between Auditors' Fees for Non-Audit Services and Earnings Management
The Relation Between Auditors' Fees for Non-Audit Services and Earnings Management
Frankel, Richard M., Johnson, Marilyn F. and Nelson, Karen K., "The Relation Between Auditors' Fees for Non-Audit Services and Earnings Management" (July 2002). MIT Sloan Working Paper No. 4330-02. Abstract: This paper examines whether auditor fees are associated with earnings management and the market reaction to the disclosure of auditor fees. Using data collected from proxy statements, we present evidence that non-audit fees are positively associated with small positive earnings surprises, the magnitude of absolute discretionary accruals, and the magnitude of income-increasing and income-decreasing discretionary accruals. In contrast, audit fees are negatively associated with these earnings management indicators. These results are robust to a variety of alternative variable definitions and model specifications. Specifically, contrary to the claims of Ashbaugh et al. (2002), the results are robust to the use of performance-matched discretionary accruals. Moreover, contrary to the claims of Francis and Ke (2002), the results for small positive earnings surprises are robust regardless of whether the comparison group is all other earnings surprises or small negative earnings surprises. Our final set of results provide evidence of a significant negative association between non-audit fees and share values on the date the fees were disclosed, although the effect is small in economic terms. Go to article
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Facts on MBA
Many programs allow students to specialize in a particular area, such as organizational behaviour, marketing, accounting, finance, operations management, technology management, strategy or international business. Unspecialized MBA programs often focus second-year studies on strategy.
New business schools at Saïd Business School (Oxford) and Judge Business School (Cambridge) joined the London Business School and other UK BAs in the Financial Times league table in 2000, an indication that the MBA degree is proving to be as widely accepted and successful in Europe as in the USA.
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