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Non-Audit Fee Cap: New European Audit Regulations and Some Evidence from Italy
Giuseppe Ianniello, PhD
Abstract
This paper focuses on recent European audit legislation reform and its first implementation in the Italian
context. In particular, we seek to address some issues related to the provision of non-audit services (NASs) to
public interest entity (PIE) audit clients. Broadly, there are two main changes: a wider list of prohibited NASs
that the auditor cannot provide to the audited company and a cap on allowed NASs to PIEs (70% of the
average of the audit fees received in the past three years). Other measures are also in place on the provision
of NASs that we consider in our analysis: monitoring by the company’s audit committee of all NASs provided
by the auditor. The first research question concerns the impact of the new non-audit fee cap on the NAS level.
The second research question refers to the effect on audit committee performance in terms of approval of
NASs, fee cap disclosure and adoption of internal procedures devoted to monitoring the decision to buy
additional services from the incumbent auditor. This latter aspect is linked to the third research question,
which concerns the relationship between the NAS fee ratio and the internal procedure for overseeing the NAS
purchase. The empirical analysis, conducted in the postreform years 2017–2023 on major Italian industrial
listed companies, provides the following main results: a lack of disclosure regarding the fee cap calculus
method and a significant reduction in the annual NAS fee ratio at an audit firm level from the initial years
(2017–2020) to the most recent years investigated (2021–2023). In terms of corporate governance, the audit
committee report does not emphasize the calculation or the disclosure of the 70% non-audit fee test;
however, we detected a significant increase in the explicit mention of a corporate internal procedure devoted
to monitoring NASs in recent years (2021–2023). Additionally, when these internal procedures are stated in
the audit committee report, the NAS fee ratio is significantly lower.
Full Text: PDF |
DOI: https://doi.org/10.30845/ijbss.v16p14
Article History:
Received: 6 October 2025 | Accepted: 23 October
2025 | Published: 27 October 2025
Reviewer(s):
Dr. Ahmad Al khraisat, National Agricultural Research Center (NARC), Jordan.
Email: [email protected]
Dr. Lang Ling Yap, Independent Researcher, Malaysia. ORCID iD: https://orcid.org/0009-0009-7001-4970.
Email: [email protected]
Address for Correspondence:
Giuseppe Ianniello, PhD, DEIM - Department of Economics, Engineering,
Society and Business, University of Tuscia, Via del Paradiso, 47, 01100
Viterbo, Italy.
Email: [email protected]
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