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MASTER THESIS
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Non-Audit Services in Private Firms: the Effect of NAS on the Cost of Debt.

Ait M'Bark, Ouissal ULiège
Promotor(s) : Compagnie, Vincent ULiège
Date of defense : 15-Jan-2025/24-Jan-2025 • Permalink : http://hdl.handle.net/2268.2/22424
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Title : Non-Audit Services in Private Firms: the Effect of NAS on the Cost of Debt.
Author : Ait M'Bark, Ouissal ULiège
Date of defense  : 15-Jan-2025/24-Jan-2025
Advisor(s) : Compagnie, Vincent ULiège
Committee's member(s) : Colson, Christophe ULiège
Language : English
Number of pages : 39
Keywords : [fr] Non-Audit Services (NAS), Cost of Debt (COD), Private Firms, Auditor Independence, Knowledge Spillovers
Discipline(s) : Business & economic sciences > Accounting & auditing
Institution(s) : Université de Liège, Liège, Belgique
Degree: Master en sciences de gestion, à finalité spécialisée en Financial Analysis and Audit
Faculty: Master thesis of the HEC-Ecole de gestion de l'Université de Liège

Abstract

[fr] Executive summary
This thesis explores the impact of Non-Audit Services (NAS) on the cost of debt (COD) for Belgian
private companies. Despite legislators in the European Union focusing their restrictions mainly on
public-interest entities, private firms still heavily rely on external audits for credibility with creditors. By
examining 567 Belgian private firms over the period 2016–2022, the study employs a firm fixed effects
approach to isolate the influence of NAS on borrowing costs. The analysis considers both the total fees
paid for NAS and their proportion relative to statutory audit fees, while also differentiating among
various types of NAS (e.g., assurance, tax, miscellaneous).
The results demonstrate that, on balance, NAS can decrease borrowing costs by enhancing creditors’
perceptions of financial reporting quality. Specifically, assurance and tax-related NAS appear to
generate knowledge spillovers that improve the reliability of financial statements, which creditors
reward with lower interest rates. However, when NAS fees become excessively high or their scope is
unclear, concerns over compromised auditor independence arise, offsetting these benefits. Robustness
checks indicate that the mitigating effect of NAS on borrowing costs is especially pronounced among
financially distressed firms, suggesting a signaling mechanism at play in which NAS engagements
convey a firm’s commitment to stronger financial oversight and transparency.
Taken together, these findings highlight the dual role of NAS: they can meaningfully reduce the cost of
debt if managed judiciously, but they also pose risks to auditor objectivity when fees or services extend
too far. The implications underscore the importance of nuanced regulatory guidance—particularly in a
private-firm context—and offer practical insights for managers looking to leverage NAS to improve
financing terms without jeopardizing auditor independence.
Word count: 13,420


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  • Ait M'Bark, Ouissal ULiège Université de Liège > Master sc. gest., fin. spéc. fin. analysis & audit

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