Audit Fee Determinants Of Independent &amp; Subsidiary Unquoted Companies In The Uk—An Exploratory Study

Brinn, Tony; Peel, Michael J.; Roberts, Roydon Alexander

doi:10.1006/bare.1994.1009

Cited by 84 publications

(99 citation statements)

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“…An appropriate comparison can be made with prior studies on smaller private sector companies, since all but a small number of charities would be classified as small in the UK private sector. Thus, our R 2 of 62% is in line with previous studies on smaller companies (e.g., 55% by Brinn et al, 1994; 62% for the small-firm sub-sample in Chan et al, 1993) but is lower than reported in large company models (e.g., 87% by Chan et al, 1993). This explanatory power compares favourably with that obtained in other studies that seek to develop audit fee models in niche markets (for example, Cullinan (1997) obtains an R 2 of 0.39 for the US pension plan market).…”

Section: < Table 5 About Here>supporting

confidence: 92%

“…For quoted companies, Chan et al (1993) found a premium of 36.7%, Ezzamel et al (1996), 23.5%, and for independent unquoted firms Brinn et al (1994) found a 28.0% premium. By contrast, neither Che-Ahmad and Houghton (1996), in their study of medium-sized UK companies, nor Clatworthy et al (2000) in their study of UK National Health Service Trusts found any evidence of a large audit firm premium.…”

Section: Discussionmentioning

confidence: 93%

“…Studies that focus on the existence of a Big Eight (more recently, Big Six) fee premium include Simunic (1980), Simon (1985, Palmrose (1986a), Francis and Simon (1987), Beatty (1993), and Gist and Michaels (1995) in the US; Taylor and Baker (1981), Taffler and Ramalinggam (1982), Chan, Ezzamel and Gwilliam (1993), Brinn, Peel and Roberts (1994), Pong and Whittington (1994), and Che-Ahmad and Houghton (1996) in the UK; Francis (1984) and Francis and Stokes (1986) in Australia; Firth (1985) and Johnson, Walker and Westergaard (1995) in New Zealand; Chung and Lindsay (1988) and Anderson and Zéghal (1994) in Canada; Low, Tan and Koh (1990) in Singapore; Lee (1996) and Gul (1999) in Hong Kong; Simon, Teo and Trompeter (1992) in Hong Kong, Malaysia and Singapore; Simon, Ramanan and Dugar (1986) in India;and Langendijk (1997) in the Netherlands.…”

Section: Acknowledgementsmentioning

confidence: 99%

“…To the extent that charities in a particular sector have similar sources of income, this aspect is proxied by the 'area of activity' dummy variables. 20 The location of the charity head office, taken from Barings, was investigated as an alternative proxy since a similar variable had been used in a previous study (Brinn et al, 1994). This was strongly correlated with audloc so was excluded from the model.…”

Section: Panel B: Experimental Variablesmentioning

confidence: 99%

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The Determinants of Audit Fees - Evidence from the Voluntary Sector

et al. 2001

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Given the growing demand for accountability in the public sector, there is a need to begin to investigate audit pricing issues in markets within this sector. This study makes three principal contributions. First, it develops and estimates, for the first time, a model of audit fee determinants relevant to the charity sector. The model is based on 210 of the top 500 UK charities with average incoming resources of £27 million. 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 fundamental nature of the charity (i.e., predominantly grant-making or fund-raising), the importance of trading as a source of charity income and the charity's activity. Separate models are developed for grant-making and fund-raising charities, the results reflecting 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. The results show that Big 6 audit firms receive higher audit fees (18.5%, on average) than non-Big 6 firms for audits of fund-raising charities. There is also evidence that non-Big 6 audit firms with expertise in the sector are rewarded with a fee premium over other non-Big 6 firms, again in the more complex audit environment of fund-raising charities.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. Further research that discriminates between alternative explanations of this differential is called for. A change in the reporting of charity audit fees is proposed to reflect any element of 'charitable giving' by the audit firm.

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Section: < Table 5 About Here>supporting

confidence: 92%

Section: Discussionmentioning

confidence: 93%

Section: Acknowledgementsmentioning

confidence: 99%

Section: Panel B: Experimental Variablesmentioning

confidence: 99%

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The Determinants of Audit Fees - Evidence from the Voluntary Sector

et al. 2001

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“…Thus, it is expected that larger charities will generally be associated with larger audit fees. In private sector studies, auditee size has often been proxied by company total assets (e.g., Taylor and Baker, 1981;Brinn et al, 1994;Firth, 1997) and occasionally by total sales (e.g., Haskins and Williams, 1988;Chan et al, 1993). In public sector studies of local government audits, population has been used as the size proxy (e.g., Rubin, 1988;Baber et al, 1987).…”

Section: Auditee Sizementioning

confidence: 99%