Beattie, V., Goodacre, A., Pratt, K. and Stevenson, J. (2001) The determinants of audit fees - evidence from the voluntary sector. Accounting and Business Research, 31(4), pp. 243-274.
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Abstract
Given the growing demand for accountability in the public sector, there is a need to begin to investigate audit pricing issues in this sector. This study makes three contributions. First, it develops and estimates, for the first time, a model of audit fee determinants for the charity sector. As in previous private sector company studies, size, organisational complexity and audit firm location are the major determinants. A positive association between audit fees and fees for non-audit services is also observed. Charity sector factors of empirical significance include the nature of the charity (i.e., grant-making or fund-raising), its area of activity and the importance of trading income. Separate models for grant-making and fund-raising charities reflect the relative complexity of the audit of fund-raising charities. Second, the lower auditor concentration in the charity sector market, compared to the private sector market, permits a more powerful test of whether large firms and/or auditor expertise are rewarded with a fee premium. In the more complex audit environment of fund-raising charities, the results show that Big Six audit firms receive higher audit fees (18.5% on average) than non-Big Six firms. Also, non-Big Six audit firms with charity expertise are rewarded with a fee premium over other non-Big Six firms. Finally, the study demonstrates that the charity audit fee rate is significantly lower than that of private sector companies; in fact it is approximately half. A change in the reporting of charity audit fees is proposed to reflect any element of 'charitable giving' by the audit firm.
Item Type: | Articles |
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Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Beattie, Prof Vivien |
Authors: | Beattie, V., Goodacre, A., Pratt, K., and Stevenson, J. |
Subjects: | H Social Sciences > HF Commerce > HF5601 Accounting |
College/School: | College of Social Sciences > Adam Smith Business School > Accounting and Finance |
Journal Name: | Accounting and Business Research |
Publisher: | Institute of Chartered Accountants in England and Wales |
ISSN: | 0001-4788 |
Copyright Holders: | Copyright © 2001 Institute of Chartered Accountants in England and Wales |
First Published: | First published in Accounting and Business Research 31(4):243-274 |
Publisher Policy: | Reproduced with the permission of the publisher |
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