Do nonaudit service fees associate with accrual earnings management during the IPO?

Abstract

The objectives of this paper it to examine the association between nonaudit service fees and accrual earnings management that take place during the IPO year. While nonaudit service fees and accrual earnings management has been examined in a number of settings, to date, there has been no work that analyses this association for IPO firm. The findings of this paper find evidence for clients of low quality audit firms that nonaudit service fees are positively associated with accrual earnings management during the IPO year, suggesting that nonaudit service fees compromise auditor independence.