Audit and auditor fee dependence - An empirical analysis of the effects on auditor independence

Auditor fee dependence on one client mitigates auditor independence and increases earnings management. Up to our knowledge we are the first to provide evidence on a positive relationship between positive discretionary working capital accruals and the auditor's percentage of total and non-audit fee dependence on the German audit market. Our study is based on German listed companies from 2005-2011 and the performance adjusted modified Jones Model". Our empirical evidence contributes to the current proposals for a regulation on statutory audits of annual accounts of the European Commission and the controversy about advisory services and statutory audit.