Restriction to Auditor's Delivery of Non-audit Services: A Qualitative Study of how the EU Audit Regulation Influences Public-interest Entities and Auditors

Mathias Dam Christensen & Christina Adelskov Larsen

Student thesis: Master thesis


This thesis investigates the Regulation (EU) no. 537/2014 and its influence on public-interest entities registered on Large Cap and statutory auditors from Big Four in Denmark, in relation to the restriction of non-audit services for the statutory auditor. Further, it will investigate the factors which influence the choice of non-audit services. To examine this, the study uses a qualitative method where 21 interviews is carried out. One of the purposes of the new regulation is to strengthen the independence of the statutory auditor because the auditor act in the public interest to create trust for a fair presentation of the financial statements. The regulation restricts the total fees for non-audit services to 70% of the fees paid for the statutory audit, prohibits certain non-audit services and increases the tasks for the audit committee and their inspection of the statutory auditor. Many companies had restrictions on the statutory auditor’s delivery of non-audit services before the new regulation, but the thesis still shows that the 70%-CAP results in a priority in the use of the statutory auditor. The prohibition on non-audit services requires interpretation although companies and auditors do not express the prohibition to be a significant influence. The study shows a tendency to an increased division in audit and non-audit services because companies choose other than the statutory auditor for non-audit services, particularly tax-services. The new regulation imposes the audit committee to approve the statutory auditor’s delivery of nonaudit services, but in practice it’s the finance department which has the dialogue with the statutory auditor and the approval of non-audit services. Furthermore, the new regulation results in an increased formalization and more strategic considerations. When firms decide whether they prefer their statutory auditor or others in the delivering of non-audit services, the study shows that soft values as quality, competences, trust, and liability are more important than the price. The study shows that when the statutory auditor chooses whether to deliver non-audit services or not, it is what the client prefers, independence in appearance and strategic considerations which influences the choice

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2018
Number of pages356
SupervisorsJørgen Valther Hansen