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http://ssrn.com/abstract=2847
 
 

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Audit Fees and Nonaudit Fees in the Governmental Sector: A Self-Selection Analysis


Randal J. Elder


Syracuse University

Susan C. Kattelus


Eastern Michigan University

Edward B. Douthett Jr.


George Mason University


Research in Government and Nonprofit Accounting, Vol. 10, pp. 65-86, 1999

Abstract:     
We use a self-selection model to examine differences in audit fees between purchasers and non-purchasers of nonaudit services for a sample of 165 Michigan governmental units. Understanding the relationship between audit fees and nonaudit fees is important because nonaudit services potentially influence audit quality in the governmental sector. We find significant differences between purchasers and non-purchasers of additional services which influence audit fees. Purchasers of additional services have more audit adjustments and less experienced financial personnel than non-purchasers, suggesting that purchasers experience more accounting problems. Consistent with previous private sector research, we find a positive relationship between audit fees and nonaudit fees. Further analysis by auditor type suggests that the relationship between audit fees and nonaudit fees is negative for Big 6 auditors, but positive for other audit firms. This difference in the relationship between audit fees and nonaudit fees by auditor type may be due to differences in the nature of the consulting services demanded, or differences in the contractual arrangements for audit and nonaudit services.

Number of Pages in PDF File: 22

Keywords: Audit fees, nonaudit services, governmental sector, self-selection.

JEL Classification: M40, M41, M49, H70

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Date posted: March 9, 2004  

Suggested Citation

Elder, Randal J. and Kattelus, Susan C. and Douthett, Edward B., Audit Fees and Nonaudit Fees in the Governmental Sector: A Self-Selection Analysis. Research in Government and Nonprofit Accounting, Vol. 10, pp. 65-86, 1999. Available at SSRN: http://ssrn.com/abstract=2847

Contact Information

Randy Elder (Contact Author)
Syracuse University ( email )
900 S. Crouse Avenue
School of Management Department of Accounting
Syracuse, NY 13244
United States
315-443-3359 (Phone)
315-443-5457 (Fax)
Susan C. Kattelus
Eastern Michigan University ( email )
Eastern Michigan University
Ypsilanti, MI 48197
United States
Edward B. Douthett Jr.
George Mason University ( email )
Fairfax, VA
United States
703-993-4234 (Phone)
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