Audit report information content and the provision of non-audit services: Evidence from Spanish lending decisions

Andrés Guiral, Emiliano Ruiz, Hyun Jung Choi

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)


This study examines whether auditor economic independence affects the information content of going concern audit reports in the European setting. We conduct an experiment where 80 experienced Spanish loan officers from the second largest European commercial bank review a loan request under two lending scenarios: (1) a potential borrower receiving an unqualified but modified going concern opinion, and (2) a potential borrower receiving a qualified going concern opinion. Auditor economic independence, measured by the provision of non-audit services (NAS), is manipulated (absence vs. presence of significant NAS). We find that a qualified going concern audit report is interpreted as a primary warning signal (death penalty). However, the provision of NAS acts as a second order mechanism that only activates loan officers' professional skepticism in the case of an unqualified but modified going concern report scenario. Therefore, we find evidence suggesting that the potential negative impact of a perceived lack of auditor independence depends on the nature of the audit report. Our findings have important implications for the European regulator, which is currently considering establishing an auditor independence regulation framework similar to that in the United States of America.

Original languageEnglish
Pages (from-to)44-57
Number of pages14
JournalJournal of International Accounting, Auditing and Taxation
Issue number1
Publication statusPublished - 2014 Apr

Bibliographical note

Funding Information:
We are grateful to previous comments and suggestions of Stuart Turley, Ken Trotman, Chris Agoglia, Christopher Humphrey, Doocheol Moon, Manuel Illueca and Michael Paz on a previous version of this manuscript. The authors are grateful to participants at the 33rd Annual Congress of the European Accounting Association, Istanbul. We gratefully acknowledge funding received from the Centro Internacional de Formación Financiera (CIFF) , Foundation, the Spanish National R+D+I Plan , and the National Research Foundation of Korea Grant funded by the Korean Government ( NRF-2012-S1A3A2-2012S1A3A2033412 ).

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance


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