—External auditing is essential due to the belief that it can enhance users' reliability of the financial reports. However, negative perception on auditor's independence decreases investors' reliability on the reports. The purpose of this study is to examine the effects of audit and non-audit fees on earnings response coefficient. Negative perception on auditor's independence concerning the high amount of fees decreases the investors' reliability on audited earnings and thus, results in lower ERCs. Based on 270 listed companies on the Bursa Malaysia in 2011, the OLS regression result shows that investors place lower reliability on earnings audited by highly paid auditors. Investors view high fees as a form of compensation to the auditors. The finding is consistent with earlier perceived studies which had found negative perceptions on high fees.
—Audit fees, non-audit fees, earnings response coefficient, auditor independence.
M. Malek and S. F. Saidin are with the Universiti Putra Malaysia, Selangor, 43400, Malaysia (e-mail: firstname.lastname@example.org, email@example.com).
Cite:Mazrah Malek and Saidatunur Fauzi Saidin, "Audit Services Fee, Non-Audit Services and the Reliability of Earnings," International Journal of Trade, Economics and Finance vol.4, no.5, pp. 259-264, 2013.