The market for external audit Services in the public sector: an empirical analysis of NHS Trusts

Clatworthy, Mark Anthony, Mellett, Howard James and Peel, Michael John ORCID: https://orcid.org/0000-0002-7444-390X 2002. The market for external audit Services in the public sector: an empirical analysis of NHS Trusts. Journal of Business Finance and Accounting 29 (9&10) , pp. 1399-1439. 10.1111/1468-5957.00475

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Abstract

This study investigates the market for audit services in the UK National Health Service (NHS). The market has a number of interesting features, including the presence of the Audit Commission as a regulator, appointer and provider of audit services. Following a theoretical overview of audit pricing in the NHS, evidence is provided on the behaviour of private sector auditors in an environment where audit risk characteristics differ from the private sector. The research also investigates, for the first time in the public sector, the relationship between audit fees and non–audit (consultancy) fees. Comparisons are also drawn between audit fees in the public and private sectors in an analysis of audit fees by industry. Despite some key similarities, the study shows that a number of differences exist between private and public sector audit fee models. In particular, we find no evidence of Big 6 (or mid–tier) auditor premiums, but we do find a significant negative relationship between audit and consultancy fees providing support for the 'knowledge spill–over' hypothesis. In addition, the fees charged to trusts appear significantly lower than their private sector counterparts, despite trust auditors having additional duties to perform. Possible explanations for this finding are offered in the paper.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HF Commerce > HF5601 Accounting
Uncontrolled Keywords:	audit fee determinants ; auditor premiums ; public sector ; consultancy fees
Publisher:	Blackwells
ISSN:	1468-5957
Last Modified:	17 Oct 2022 09:21
URI:	https://orca.cardiff.ac.uk/id/eprint/2825

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