External Audit in the National Health Service in England & Wales: a Study of an Oversight Body's Control of Auditor Remuneration

Posted: 8 May 2006 Last revised: 10 Apr 2009

See all articles by Ilias G. Basioudis

Ilias G. Basioudis

Aston University - Aston Business School

Sheila Ellwood

University of Bristol - Department of Finance and Accounting

Abstract

In the National Health Service (NHS) in England and Wales an oversight body, the Audit Commission (AC), defines the scope of the external auditors' work, appoints the auditors and has oversight of their fees and audit quality. This heavily regulated audit regime mitigates some of the deficiencies observed in high profile corporate failures.

Independence, it has been argued, is influenced by the total auditor remuneration paid by the client. In this study we examine total auditor remuneration in a regulated market which seeks to ensure audit independence and audit quality. In particular we undertake rigorous analysis of auditor remuneration by the type of auditor: We place emphasis on the differentiation between private sector firms and the AC's in-house auditors (District Audit). Individual private audit firms charge premiums (up to 16%) for particular audit work in identified locations, but no premiums were found when we examined total auditor remuneration. The regime appears to permit efficient operation of the audit market while safeguarding both audit independence and standards.

Keywords: audit regulation, auditor remuneration, audit fees, corporate governance, NHS trusts, audit independence, audit quality

Suggested Citation

Basioudis, Ilias G. and Ellwood, Sheila, External Audit in the National Health Service in England & Wales: a Study of an Oversight Body's Control of Auditor Remuneration. Journal of Accounting and Public Policy, Vol. 24, pp. 207-241, 2005, Available at SSRN: https://ssrn.com/abstract=901058

Ilias G. Basioudis

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

Sheila Ellwood (Contact Author)

University of Bristol - Department of Finance and Accounting ( email )

United States

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