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Partner-scale economies, service bundling and auditor independence in the Australian self-managed superannuation (pension) fund industry

Version 2 2024-06-05, 03:48
Version 1 2016-11-29, 13:49
journal contribution
posted on 2024-06-05, 03:48 authored by B Arnold, H Bateman, A Ferguson, A Raftery
Using proprietary Australian Taxation Office (ATO) data, this study examines audit pricing, service bundling and independence issues in the self-managed superannuation fund (SMSF) sector, the fastest growing and largest segment of the Australian $2 trillion retirement savings industry. We consider the impact of partner-level scale effects for a large sample of SMSF audits for the three years to June 2010. After controlling for factors known to determine audit fees, we find evidence of fee discounting by partners with large client portfolios. However, when the dependent variable is redefined to the total 'bundle' of services (including audit and non-audit fees), the firms of partners with larger client portfolios are shown to earn bundling fee premiums. This finding suggests industry specialists price strategically using audits as a conduit to supply higher margin non-audit services (NAS) to clients with more resources. Last, we find no evidence the supply of NAS impairs auditor independence, alleviating joint supply concerns raised in the Cooper Review.

History

Journal

AUDITING: a journal of practice & theory

Volume

36

Pagination

161-180

Location

Sarasota, Florida

ISSN

0278-0380

eISSN

1558-7991

Language

eng

Publication classification

C1 Refereed article in a scholarly journal, C Journal article

Copyright notice

American Accounting Association

Issue

2

Publisher

American Accounting Association