7. The Richard M. This paper A sample of 1. In terms of auditor fees, 1. There is positive relation Frankel, tests the 3074 firms they adopt three relationship between between Marilyn F. during the specifications, those are fees and small Johnson and between period from the ratio of non-audit fees earnings surprises; auditors’ fees for Karen K. auditor February 5, to total fees, the percentile 2. Non-audit fees non-audit Nelson fees and 2001 to June rank of the amount of positively relates to services (2002) earnings 15, 2001 fees and audit fees as absolute discretionary and based on well as the percentile rank accruals as well as earnings as well of the amount of total fees, income-increasing and SEC’s as the EDGAR by auditor, which income-decreasing market database and disclosed by each firm; discretionary accruals; reaction Compustat in 2. They run the regression 3. Audit fees negatively towards America. model by defining relates to discretionary the auditor earnings benchmark accruals; fees (surprises) as the 4. There is no relationship disclosure dependent variable to between total fees and proxy for earnings earnings management; management; 5. There is no association 3. They also adopt another between non-audit fees proxy to represent and the possibilities of earnings management, reporting a small increase discretionary accruals in earnings; using the cross-sectional 6. The disclosure of modified Jones model. fees negatively associates with share values.
7. The relation between auditors’ fees for non-audit services and earnings Richard M. Frankel, Marilyn F. Johnson and Karen K. Nelson (2002) This paper tests the between auditor fees and earnings as well as the market reaction towards the auditor fees disclosure A sample of 3074 firms during the period from February 5, 2001 to June 15, 2001 based on SEC’s EDGAR database and Compustat in America. 1. In terms of auditor fees, they adopt three specifications, those are the ratio of non-audit fees to total fees, the percentile rank of the amount of fees and audit fees as well as the percentile rank of the amount of total fees, by auditor, which disclosed by each firm; 2. They run the regression model by defining earnings benchmark (surprises) as the dependent variable to proxy for earnings management; 3. They also adopt another proxy to represent earnings management, discretionary accruals using the cross-sectional modified Jones model. 1. There is positive relationship between fees and small earnings surprises; 2. Non-audit fees positively relates to absolute discretionary accruals as well as income-increasing and income-decreasing discretionary accruals; 3. Audit fees negatively relates to discretionary accruals; 4. There is no relationship between total fees and earnings management; 5. There is no association between non-audit fees and the possibilities of reporting a small increase in earnings; 6. The disclosure of fees negatively associates with share values.