La relazione tra servizi diversi dalla revisione ed earnings management: studio esplorativo del contesto italiano

RELATION BETWEEN NON-AUDIT SERVICES AND EARNINGS MANAGEMENT: EVIDENCE FROM ITALIAN CONTEXT. Provision of non-audit services by audit firms, defined as advisory services that are not explicitly forbidden by the law, can often fortify the bond between auditor and client, sometimes compromising auditor independence. In fact, an audit firm, which carries out its tasks in a company from which receives high fees for non-audit services, may be willing to accept and hide abnormal earnings management, which occurs when management uses judgment in financial reporting to alter financial reports. This paper aims to provide empirical evidence in order to understand whether non-audit services affect earnings management. This topic has been deeply investigated, but with mixed results. To our knowledge, this is the first study that focuses the research question on the Italian context, which is interesting for its peculiarities. It contributes to the literature, on one side, by adding another piece to the mosaic of the international literature on the relation between non-audit services and earnings management, developing the study in a context of poor corporate governance, and on the other side, depicting the state of this relation in Italy in order to support judgments of academics, practitioners and policy makers. To reach our aim, we carried out an empirical research, collecting data from a sample of Italian companies listed in the Italian Stock Exchange over a two year period (2009-2010). Accordingly with the prevailing literature, we hypothesized that the provision of non-audit services may have a negative influence on the implementation of practices of earnings management. The analysis, in particular, was conducted through the application of a model already implemented in the North-American context, that of Lim and Tan (2008), assessing earnings management by means of discretionary accruals, measured through the modified-Jones model. Results of the analysis show that the provision of non-audit services may have an impact on earnings management. In particular, this happens when the level of non-audit services in relation to the total services grows, and consequently the fees received by audit firm grow. These results suggest that non-audit services, hindering auditor independence, should be limited by law, not only in terms of kind of services that may be provided but also in terms of amount provided. This study is the first step of a path of investigation on the relation between the two aspects, which may be also influenced by corporate governance variables that will be investigated in further studies.