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Knowledge spillover from other assurance services

journal contribution
posted on 2018-04-01, 00:00 authored by M E Bradbury, Adrian Raftery, T Scott
We argue that services which are complimentary and closer aligned to the annual report audit provide greater insight about risk and are more likely to exhibit the existence of economies of scope (knowledge spillover) through a positive association with audit fees. Specifically, we consider the potential for knowledge spillover from the auditing of triennial Long-Term Plans (LTP) to the annual report audit for a large sample of New Zealand municipals over the period 2005 to 2013. We find the LTP audit fees are positively related to municipal annual report audit fees and other fees (audit of for-profit subsidiaries, non-audit services) are not. This suggests that knowledge spillovers are dependent on the nature of the additional services. We also find evidence of higher fees for private sector auditors for both the annual report and the LTP audit. The LTP (forecast) audit fee is associated with municipal size, complexity, and political competition.

History

Journal

Journal of contemporary accounting and economics

Volume

14

Issue

1

Pagination

52 - 64

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

1815-5669

Language

eng

Publication classification

C Journal article; C1 Refereed article in a scholarly journal

Copyright notice

2018, Elsevier