Date of Award
2015
Document Type
Thesis
Publisher
Edith Cowan University
Degree Name
Master of Accounting by Research
School
School of Business
Faculty
Faculty of Business and Law
First Supervisor
Associate Professor Hadrian Djajadikerta
Second Supervisor
Honorary Associate Professor Colin Dolley
Abstract
Accounting, and more specifically auditing, plays an important role in charity organisations’ accountability processes. This has been highlighted with the commencement of the Australian Charities and Not-for-Profit Commission in 2012 heralding a new era of accountability and regulation. It is in this context that this study used a stratified sample of 101 Australian charities’ 2011-2012 annual reports to study five aspects of the charity audit market, which formed its objectives. These were: a) to estimate and develop a model of Australian charity fee audit determinants; b) to determine if there was evidence of Big Four audit firm fee premiums in a market where the Big Four may not dominate; c) to test for the existence of audit fee premium pricing amongst non-Big Four audit firms; d) to test for the existence of an audit fee premium for audit firm offices; and e) to test for the existence of an audit fee premium for audit firm partners.
This study found support for the choice of audit firm (Big Four audit firm versus non-Big Four audit firm) having an influence on audit fee pricing. Auditee complexity, a well-established determinant in the private sector literature, was also shown to have some influence on charities’ audit fee costs, in the form of incorporation (company versus non-company) and size as represented by proxy, income being significant. Trading income too indicated a possible influence on charities’ audit fees, but these findings were limited and require further investigation.
In this study a Big Four audit premium was shown to exist in the Australian charity sector. It is also shown that small audit firms with a single client may have been discounting audit fees, but further investigation is required to confirm this.
In summary, this study put the spotlight on a sector that has not previously been examined, and provides deeper insights into the Australian charity sector and audit fee pricing.
Recommended Citation
Priest, A. (2015). Australian charity organisations: A study of audit fee determinants. Edith Cowan University. Retrieved from https://ro.ecu.edu.au/theses/1695