The following extract reports the findings of a New Zealand research study:

Deborah Alexander, David Hay, (2013) "The effects of recurring and nonrecurring non audit services on auditor independence", Managerial Auditing Journal, Vol. 28 Issue: 5, pp.407-425, doi: 10.1108/02686901311327191

Purpose This study seeks to examine whether there are differences between companies that purchase either recurring or nonrecurring audit services and those that do not, and whether auditors discount their audit fees for either type of nonaudit service.

Design/methodology/approach The study examines associations between audit and nonaudit fees in New Zealand, for the period 1995 to 2001. The advantage of this setting is that data on nonaudit services was disclosed in this period and that the period predates more recent controversies over whether nonaudit services are permissible.

Findings Companies that purchase any type of nonaudit services from their auditors are larger and more complex than companies that purchase auditing only. Companies that obtain tax services from their auditors usually do so on a recurring basis. In contrast, consulting services do not tend to occur every year. Auditors do not discount their fees for either recurring or nonrecurring nonaudit services.

Research limitations/implications While useful data is available about the type of nonaudit services provided, there are limitations to the extent to which this information provides a precise measure of whether the services were recurring or not.

Originality/value The research contributes to understanding the issues regarding auditors providing nonaudit services by providing evidence that neither recurring nor nonrecurring services are associated with a reduction in audit fees. This finding is relevant when considering whether regulation of nonaudit services should permit certain types of services, or should prohibit all nonaudit services

Required: The abstract above concludes: This finding is relevant when considering whether regulation of nonaudit services should permit certain types of services, or should prohibit all nonaudit services. Explain in what way it is relevant, in other words does it provide evidence that auditors should be allowed to provide non-audit services, or does it provide evidence that they should not?