Audit and Non-audit Fees and Capital Market Perceptions of Auditor Independence
By Aloke Ghosh, Sanjay Kallapur, Doocheol Moon
Journal of Accounting and Public Policy | September 2009
DOI
www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VBG-4X1GG33-1&_user=1022182&_coverDate=10%2F31%2F2009&_rdoc=2&_fmt=high&_orig=browse&_srch=doc-info%28%23toc%235926%232009%23999719994%231507120%23FLA%23display%23Volume%29&_cdi=5926&_sort=d&_docanchor=&_ct=7&_acct=C000050483&_version=1&_urlVersion=0&_userid=1022182&md5=5b993599ecc96a642c18fa6b5466cc40
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Ghosh, Aloke., Kallapur, Sanjay., Moon, Doocheol. Audit and Non-audit Fees and Capital Market Perceptions of Auditor Independence Journal of Accounting and Public Policy www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VBG-4X1GG33-1&_user=1022182&_coverDate=10%2F31%2F2009&_rdoc=2&_fmt=high&_orig=browse&_srch=doc-info%28%23toc%235926%232009%23999719994%231507120%23FLA%23display%23Volume%29&_cdi=5926&_sort=d&_docanchor=&_ct=7&_acct=C000050483&_version=1&_urlVersion=0&_userid=1022182&md5=5b993599ecc96a642c18fa6b5466cc40.
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Journal of Accounting and Public Policy, 2009
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Abstract
This study provides evidence on whether auditor independence-in-appearance, proxied by earnings response coefficients, is related to the non-audit fee ratio (non-audit to total fees from a client) or client importance (total fees from a client as a percentage of the total revenues of the audit firm). The results from large samples over the period 2001 to 2006 show, contrary to popular belief and the findings of some prior studies, that there is no evidence of a relation between perceived auditor independence and the non-audit fee ratio. However, perceived auditor independence is negatively associated with client importance, consistent with the economic theory of auditing. Our paper adds to the literature by examining the relative importance of non-audit fee ratios and client importance as determinants of independence-in-appearance.

Sanjay Kallapur is a Professor of Accounting at the Indian School of Business (ISB). He joined ISB in 2005 from the Krannert School of Management, Purdue University, where he was a tenured Associate Professor.

Professor Kallapur conducts research on financial and managerial accounting, auditing, corporate governance, and risk management. He has published in each of the top three accounting journals, and his papers have been cited over 4,000 times (Google Scholar) and in regulatory policy documents in India and the UK. The American Accounting Association recently published his monograph on scientific inference in accounting research, beyond the use of p-values.

He is the founding Editor-in-Chief of Accounting Theory and Practice, a research journal focusing on India, published by Elsevier. He has been an editor of The Accounting Review from 2008 to 2011, the first person from outside North America to be appointed to that position.

Professor Kallapur is a member of National Financial Reporting Authority (NFRA), the regulatory body overseeing the accounting and auditing of listed companies in India. He is an independent director on the Board of IDBI Bank, where he serves on the risk management and audit committees. He previously served on the Board of the Life Insurance Corporation of India.

Professor Kallapur has held positions as Associate Dean and Deputy Dean for almost a decade at ISB. He started the PhD-equivalent Fellow Programme in Management at ISB and has placed his students in faculty positions at the London School of Economics, IESEG Paris, Aalto University, University of Queensland, University of Western Australia, and IIM Udaipur.

Professor Kallapur has a PhD in Business Economics from Harvard Business School, and B.Com. and M.M.S. degrees from Mumbai University. He is professionally qualified as a Fellow Member of the Institute of Cost Accountants of India (FCMA).

Sanjay Kallapur
Sanjay Kallapur