The Pricing of Audit and Non-Audit Services in a Regulated Environment: A Longitudinal Study of the UK Life Insurance Industry
Paul Klumpes, Iliya Komarev & Konstantinos Eleftheriou (2016) The pricing of audit and non-audit services in a regulated environment: a longitudinal study of the UK life insurance industry, Accounting and Business Research, 46:3, 278-302, DOI: 10.1080/00014788.2015.1056719
49 Pages Posted: 15 Mar 2012 Last revised: 1 Dec 2018
Date Written: October 1, 2013
This paper studies the relationship between audit and non-audit service fees in the UK life insurance industry in the period 1999-2009. Moreover, we examine the impact of ownership structure and internal governance on the level of direct audit fees. Utilizing panel data econometric techniques, we find that audit fees are positively (negatively) affected by actuarial (legal service) fees. We conclude that actuarial services generate knowledge spillover, while legal services impair auditor's independence. Our results indicate that the improved corporate governance environment after the Revised Code of 2003 filtered the fundamental nature of different non-audit services. Furthermore, mutual ownership and independent board of directors increase the level of audit fees. Finally, we find evidence for the inter-temporal determination of audit fees.
Keywords: audit fees, non-audit service fees, actuarial services, governance mechanisms, financial institutions
JEL Classification: C23, G22, G32
Suggested Citation: Suggested Citation