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Effect of Outsourcing Public Sector Audits on Cost-Efficiency

21 Pages Posted: 24 Nov 2009  

Kar-Ming Chong

UNSW Australia Business School, School of Accounting

Colin Dolley

Edith Cowan University

Keith A. Houghton

Australian National University (ANU) - Faculty of Economics & Commerce; Australian National University (ANU) - Crawford School of Public Policy

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business

Abstract

This study compares the cost-efficiency of ‘in-house’ and outsourced to private sector audit supplier arrangements to deliver financial audits in the public sector by examining audit cost-efficiency within the context of the public sector arrangement at one state in Australia (Western Australia). The results for 178 public agencies show that outsourced audits are, in general, more costly than in-house audits, but this result is conditional on the type and size of public agency. Specifically, outsourced audits are more costly than in-house audits for small statutory authority audits, whereas for specialist audits (i.e. hospitals) and large and complex statutory authority audits, the in-house supply is equally efficient as the outsourced service.

Suggested Citation

Chong, Kar-Ming and Dolley, Colin and Houghton, Keith A. and Monroe, Gary S., Effect of Outsourcing Public Sector Audits on Cost-Efficiency. Accounting & Finance, Vol. 49, No.4, pp. 675-695, December 2009. Available at SSRN: https://ssrn.com/abstract=1512859 or http://dx.doi.org/10.1111/j.1467-629X.2009.00302.x

Kar-Ming Chong (Contact Author)

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia
+61-2-9385-5916 (Phone)
+61-2-9385-5925 (Fax)

Colin Dolley

Edith Cowan University ( email )

Pearson St.
Churchlands 6018 WA
Australia
+61 8 9273 8438 (Phone)
+61 8 9273 8121 (Fax)

Keith A. Houghton

Australian National University (ANU) - Faculty of Economics & Commerce ( email )

Canberra, Australian Capital Territory 2601
Australia

Australian National University (ANU) - Crawford School of Public Policy

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business ( email )

Sydney, NSW 2052
Australia
+61293856443 (Phone)

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