An Examination of Office-Level and Client-Level Non-Audit Services and Audit Quality

SYNOPSIS Prior academic studies have investigated client- or office-level non-audit services (NAS) and found either positive effects through knowledge spillover or negative effects due to independence impairment or distraction. This study complements existing research by examining whether the effects of office-level and client-level NAS on audit quality vary with an audit office’s NAS focus. Specifically, we find a nonlinear association between office-level NAS provision and audit quality, with client misstatement rates lowest when the office provides moderate levels of NAS. Tax-related NAS drives these results. Further analysis reveals that the office-level focus on NAS affects the association between client-level NAS purchases and audit quality. This study enhances our understanding of the office-level and client-level dynamics of NAS provision to audit clients, offering regulators and practitioners relevant insights as they navigate this issue. Data Availability: All data sources are noted in the manuscript. JEL Classifications: M4; M41; M42.