Non-audit services, auditor quality and the value relevance of earnings

Ferdinand A. Gul, Judy Tsui, Dan S. Dhaliwal

Research output: Contribution to journalArticlepeer-review

61 Scopus citations


This paper tests the hypothesis that there is an inverse relation between non-audit services (NAS) provided by a firm auditor and the value relevance of earnings (measured as the earnings response coefficient) and that this relation is weaker for firms with Big 6 auditors. The hypothesis is based on anecdotal evidence and previous research that suggests that the provision of NAS by the external auditor is likely to adversely affect investors' perceptions of the credibility of financial reports, and that Big 6 auditors, because of reputational capital and litigation costs, are likely to mitigate the adverse effects of NAS. Results using 840 firm-year observations of Australian companies document a statistically significant inverse relationship between NAS and the value relevance of earnings, and this inverse relationship is weaker for Big 6 auditors, therefore supporting the hypothesis.

Original languageEnglish (US)
Pages (from-to)797-817
Number of pages21
JournalAccounting and Finance
Issue number5
StatePublished - Dec 2006


  • Audit quality
  • Auditor independence
  • Earnings, non-audit services
  • Value relevance

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)


Dive into the research topics of 'Non-audit services, auditor quality and the value relevance of earnings'. Together they form a unique fingerprint.

Cite this