Public and Private Sector Auditors and Accruals Quality in English NHS Hospital Trusts

Posted: 7 Apr 2008

See all articles by Joan Ballantine

Joan Ballantine

University of Ulster; University of Ulster

John Forker

Queen's University Management School

Margaret Greenwood

University of Bath School of Management; University of Bath - School of Management

Abstract

To promote auditor independence and audit quality in English NHS Trusts the Audit Commission regulates auditor rotation, fees and the appointment of its own and private sector auditors. NHS sanctioned departures from GAAP, some of which allow the financial breakeven target to be achieved, have been criticised by the Audit Commission as detrimental to financial discipline. In this paper we investigate the association between abnormal accruals and the achievement of financial breakeven in NHS hospital Trusts over the period 1998 to 2005. We also investigate the association between abnormal accruals, audit fees and the Trusts audited by public and private sector auditors. We find evidence that abnormal accruals are used to achieve financial breakeven and they differ across different types of auditor. We also identify a negative relationship between abnormal accruals and NHS Trust star ratings. These findings raise questions about the `quality' of NHS audit where compliance with NHS-specific regulations overrides the wider GAAP based requirement for financial statements to show a true and fair view and they warrant reconsideration of the nature of audit in NHS Trusts.

Keywords: audit quality, abnormal accruals, NHS Trust

Suggested Citation

Ballantine, Joan Amanda and Ballantine, Joan Amanda and Forker, John and Greenwood, Margaret J. and Greenwood, Margaret J., Public and Private Sector Auditors and Accruals Quality in English NHS Hospital Trusts. British Accounting Review, Vol. 40, No. 1, Available at SSRN: https://ssrn.com/abstract=1116302

Joan Amanda Ballantine

University of Ulster ( email )

Northland Road
Londonderry, BT48 7JL
Northern Ireland

University of Ulster ( email )

Jordanstown Campus
Shore Road
Newtownabbey, Northern Ireland BT37 0QB
Northern Ireland

John Forker (Contact Author)

Queen's University Management School ( email )

25 University Square
Belfast, Northern Ireland BT7 1NN
Northern Ireland

Margaret J. Greenwood

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
01225 383227 (Phone)

University of Bath School of Management ( email )

Bath, BA2 7AY
United Kingdom

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