Audit fees, non-audit fees and auditor going-concern reporting decisions in the United Kingdom

The accounting profession has come under increased scrutiny over recent years about the growing number of non-audit fees received from audit clients and the possible negative impact of such fees on auditor independence. The argument advanced is that providing substantial amounts of non-audit services to clients may make it more likely that auditors concede to the wishes of the client management when difficult judgments are made. Such concerns are particularly salient in the case of reporting decisions related to going-concern uncertainties for financially stressed clients. This study empirically examines audit reports provided to financially stressed companies in the United Kingdom and the magnitude of audit and non-audit service fees paid to the company’s auditors. We find that the magnitude of both audit fees and non-audit fees are significantly associated with the issuance of a going-concern modified audit opinion. In particular, financially stressed companies with high audit fees are more likely to receive a going-concern modified audit opinion, whereas companies with high non-audit fees are less likely to receive a goingconcern modified audit opinion. Additional analyses indicate that the results are generally robust across alternative model and variable specifications. Overall, evidence supports the contention that high non-audit fees have a detrimental effect on going-concern reporting judgments for financially stressed U.K. companies.

Auditor's engagement risk and audit fees:the role of the audit firm alumni

This study explores the effect of the association of audit firm alumni with their alma mater on audit prices. The tests indicate that there is a moderate reduction of up to 21% in the level of audit fee when alumni (i.e., former employees) of the incumbent audit firm sit on the client board of directors which is consistent with the engagement risk theory. This suggests that there is an 'alumni effect' in the market for audit services. The findings hold only in the large company segment of the market. The results are robust to different model specifications and alternative samples. The sample comprises all executive and non-executive directors who run the UK quoted companies and are simultaneously ICAEW qualified chartered accountants. The study's implications for the accounting profession and the regulators are also discussed. © 2007 The Author Journal compilation © 2007 Blackwell Publishing Ltd.

Evaluating cost efficiency in central administrative services in UK universities

This paper describes an attempt to evaluate cost efficiency in UK university central administration. The funding councils of higher education institutions have progressively evolved elaborate systems for measuring university performance in teaching quality and research. Indeed, funding of universities is linked to their performance in research. The allocation of resources between academic and administrative activities, on the other hand, has so far not been subject to scrutiny. Yet, expenditure on administration is typically some 30% of that allocated to academic activities. This paper sets up a data envelopment analysis (DEA) framework to identify practices leading to cost-efficient central administrative services in UK universities. The problems in defining the unit of assessment and the relationship between the inputs and the outputs are clearly demonstrated. © 2005 Elsevier Ltd. All rights reserved.

The development and evaluation of distance learning materials for administrative personnel in a multi-national company

There has been substantial research into the role of distance learning in education. Despite the rise in the popularity and practice of this form of learning in business, there has not been a parallel increase in the amount of research carried out in this field. An extensive investigation was conducted into the entire distance learning system of a multi-national company with particular emphasis on the design, implementation and evaluation of the materials. In addition, the performance and attitudes of trainees were examined. The results of a comparative study indicated that trainees using distance learning had significantly higher test scores than trainees using conventional face-to-face training. The influence of the previous distance learning experience, educational background and selected study environment of trainees was investigated. Trainees with previous experience of distance learning were more likely to complete the course and with significantly higher test scores than trainees with no previous experience. The more advanced the educational background of trainees, the greater the likelihood of their completing the course, although there was no significant difference in the test scores achieved. Trainees preferred to use the materials at home and those opting to study in this environment scored significantly higher than those studying in the office, the study room at work or in a combination of environments. The influence of learning styles (Kolb, 1976) was tested. The results indicated that the convergers had the greatest completion rates and scored significantly higher than trainees with the assimilator, accommodator and diverger learning styles. The attitudes of the trainees, supervisors and trainers were examined using questionnaire, interview and discussion techniques. The findings highlighted the potential problems of lack of awareness and low motivation which could prove to be major obstacles to the success of distance learning in business.