Non-Audit Services and Audit Quality: Moderating Role of Audit Partner Attributes

Abstract

This study explores the association between Non-Audit Services (NAS) and Audit Quality (AQ), using a data sample of 66 firms taken from the Non-Financial Sector, which were listed on the Bombay Stock Exchange (BSE) for the years 2012 & 2014. Furthermore, it also examines the moderating influence of Audit Partner Attributes upon this relationship, in the sense of male and female audit partners. The reason for selecting these years is that the company act was published in 2013 so this study comprised the data for the period before and after 2013 to incorporate the change analysis. Variables, such as NAS, have been measured by dividing the NAS fee paid to the auditor by the total audit fee paid to the auditor. For calculating AQ, the proxy that is used in this study is Earnings Management (EM). Whereas, Jones, Modified Jones, and Kothari models have been used to measure earnings management. Finally, Audit Partner attributes have been measured through Gender, i.e., male and female partners. Based on descriptive statistics, the study shows that NAS impacts AQ, but it is insignificant. Companies act 2013 also has not had a significant impact on this relationship. Rules and regulations of the companies act 2013 are increasing the AQ itself, but where NAS is provided, it has a lessened impact on increasing the AQ. Overall, NAS has a negative impact on AQ but at an insignificant level, and moderating impact of audit partner attributes has no significant impact on this relationship.