Auditor Independence, Audit Fees Lowballing, and Non-Audit Services : Evidence from Fiji

This study empirically examines the supply side of the market for non-audit services. In particular, a model for the supply side of the market for non-audit services is developed. This model is then tested using audit and non-audit fee data from Fijian listed companies from the year 1980 to 2010. We find that audit fee low-balling leads to increased supply of non-audit services. This result is statistically significant. We also find that Big 4 auditors supply less non-audit services compared to non-Big 4 auditors. Finally, we find that the longer the auditor tenure the lower the supply of non-audit services. However, both these results are statistically insignificant. This leads to a conclusion that non-audit services are being supplied for opportunistic reasons as opposed to efficiency reasons. Our results are robust to a number of sensitivity checks