The Determinants of External Audit Costs in the New Zealand Life Insurance Industry |
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Authors: | Mike Adams Mike Sherris & Mahmud Hossain |
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Institution: | University of Glasgow,;Macquarie University,;Massey University |
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Abstract: | The contracting theory literature suggests that auditors' pricing decisions reflect the efficacy of contracting arrangements in firms. Drawing a framework from this literature, we test empirically the simultaneous effect of six firm-specific variables on external audit costs using 1988–1993 data drawn from New Zealand's (NZ) life insurance industry. These variables are: assets-in-place, reinsurance, internal governance, firm size, product-mix and organizational form. Consistent with expectations, our results indicate that audit fees are influenced by product-mix and firm size. However, the other variables are found not to be statistically significant. The empirical results thus provide mixed support for contracting theory. |
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