The Effect of Non-Audit Services Provided by Audit Institutes on Auditor Independence and Audit Quality

This research investigates the effect of non-audit services provided by audit institutes on auditor independence and audit quality. Considering Iranian Association of Certified Public Accountants and selection of committed audit institutes within the society, competition has increased among the audit institutes and these institutes try to enhance their revenue by providing various services. Enhancing the revenue of audit institutes for providing non-audit services might lead to financial dependence on employer and weaken the auditor independence and also affect the audit quality. The main goal of this research is to study the effect of non-audit services on independence of independent auditors and also to study the effect of non-audit services of audit institutes on audit quality. The research contains two hypotheses and necessary information for testing the hypotheses is collected based on a questionnaire and a survey of audit institutes that are members of Association of Certified Public Accountants and their staff as the research population and the questionnaire was distributed among them. To test the hypotheses nonparametric chi-square test has been used and to examine the intensity of the relationship, concordance coefficient has been calculated. The results of the research show that non-audit services that an independent auditor provides for his employer, in addition to auditing financial statements in the same fiscal year, will reduce independency. Moreover, non-audit services that an independent auditor provides for his employer will increase the audit quality.