David Gwilliam

Some Empirical Evidence from Publicly Quoted UK Companies on the Relationship Between the Pricing of Audit and Non-audit Services

Abstract Using data obtained from a sample of 314 UK quoted companies (excluding financial sector companies), this paper examines three aspects of the relationship between fees for audit and non-audit services: (a) the extent and nature of the provision of non-audit services to audit clients; (b) whether the positive association between the level of audit fees and non-audit services fees found in the majority of non-UK studies holds in the UK; and (c) whether it is possible to throw further light on the nature of the relationship between audit fees and non-audit services fees by exploring the interaction between non-audit services and other factors that appear to affect audit pricing. Our results suggest that: (i) income earned by audit firms from non-audit work for quoted clients averaged nearly 90% of the levels of audit fee earnings in 1992/93 (and more than a quarter of clients paid more for non-audit services than for the audit); (ii) the extent of voluntary disclosure of the breakdown of non-audit s...

THE DEVELOPMENT OF INTERNAL AUDIT IN SAUDI ARABIA: AN INSTITUTIONAL THEORY PERSPECTIVE

Abstract This paper uses institutional theory to interpret the results of two questionnaires and research interviews concerned with internal audit in the Saudi Arabian corporate sector. The results show that internal audit is not well developed. Where it does exist it operates in departments that are inadequately resourced, lack qualified staff, have restrictions on their degree of independence, concentrate on compliance audit rather than performance audit, and where internal auditors are not accepted by management and auditees. Using institutional theory it is suggested that the state should play a more coercive role by encouraging organizations to establish internal audit departments and organize their activities in the manner specified in internal audit standards.

An examination of the relationship between internal and external audit in the Saudi Arabian corporate sector

This paper uses questionnaires from and interviews to examine the level of co‐operation and co‐ordination between directors of internal audit departments, and partners and managers in external audit firms in Saudi Arabian companies. The results revealed that external auditors expressed concern about the independence, scope of work and small size of many internal audit departments. Internal auditors considered co‐operation between internal and external audits to be limited, although external auditors were more positive about the extent of co‐operation when the internal audit department was of high quality. The extent of reliance by the external auditor on the work of the internal auditor varied with the quality of the internal audit department. External auditors suggested that the objectivity, competence and work experience were important factors affecting the reliance decision. They felt that the internal audit function in many Saudi companies lacked professionalism and independence from management, which adversely affected its work and the potential for reliance thereon.

Human resource management issues in audit firms: a research agenda

This paper discusses the contribution and value of research into human resource management issues as they affect auditors and audit firms, and to identify areas for future research. The contribution and areas for future research are identified in terms of four areas, namely career development, staffing patterns, the multi‐disciplinery global firm, and the management structure and practice as they relate to audit firms. This is followed by a discussion about the value of this research. In the conclusion the paper argues for future research to adopt a greater sociological and organizational perspective, including studies which work shadow auditors and audit teams, and longitudinal studies.

The costs and benefits of increased accounting regulation: a case study of Lloyd's of London

Abstract While a valuable literature exists on theoretical considerations in cost-benefit analysis (cba) of accounting regulation, and although the regulators themselves acknowledge the need for cost-benefit appraisal of their work, empirical analysis of the costs and benefits of changes in accounting regulation is almost non-existent. This paper attempts such an analysis for a step change in accounting and audit regulation—at Lloyds between 1982 and 1985. It aims both to advance the cba methodology, and to inform debate about the evolution of the Lloyds market. While the estimates do not show whether the changes produced an optimal level or form of Lloyds regulation, they do suggest that, comparing changes, the extra benefits exceeded the extra costs—whether the chosen accounting unit is a private one—Lloyds Names—or a social one.

Accountants, or auditors, tax practitioners, management consultants etc.? A research note

This paper reviews prior research to consider whether there are differences in human resource management terms between auditors and other categories of professional staff within accounting and audit firms, for example those working in taxation or management consultancy. The review reveals conflicting results regarding the extent of these differences, which leaves open the question of whether research results in the human resource field can be generalized across all functions within an accounting and audit firm. We speculate that whereas in the past the similarities between functional groups may have outweighed any differences, increasingly this will no longer be the case.

Principals and agents in crisis: reforms of accounting and audit at Lloyd’s, 1982-1986:

The 1970s and early 1980s saw significant structural change in the insurance market at Lloyd’s of London and it became increasingly difficult for providers of the collateral against which insurance was written to monitor the activities of those responsible for writing the insurance risks and determining the distribution of returns. Agency theory analyses the incentives for principals and agents to develop more formal and rigorous arrangements for accounting and audit when agents become more remote from principals. However, when we examine the historical evidence, we find little sign of such development at Lloyd’s during this period. We explore a number of institutional characteristics of the Lloyd’s market which acted to constrain adaptation until external regulatory pressure was brought to bear. Conclusions are drawn on the limited role of agency theory in guiding policymakers and regulators in financial markets.

Financial control in the financial services industry: The case of Lloyd’s of London

During the last decade there have been many changes in the regulation of UK financial institutions designed both to increase competition and, through ‘self-regulation’, to improve accountability to clients and providers of capital. Much of the regulatory framework imposed by the state is embodied in the Financial Services Act 1986 (FSA) and in the related legislation for individual financial sectors, and the associated reporting and audit requirements emphasize the central importance of adequate financial reporting and financial controls.

The Court's Power of Discretionary Relief in Actions Against Auditors

Abstract Since 1929, successive Companies Acts have empowered the courts to relieve a company auditor, wholly or partly, from liability for negligence having regard to all the circumstances of the case and if the auditor has acted ‘honestly and reasonably’. This power is now contained within section 727 of the Companies Act 1985. By reference to decided cases in the UK and in those Commonwealth countries where similar legislation exists this article reviews the manner in which the courts have interpreted this section and explores the reasons why they have rarely, if ever, chosen to use their powers under this section in favour of auditors.

Human Resource Management Issues in Accounting and Auditing Firms: A Research Perspective : A Research Perspective

The audit environment the research studies - issues of methodology and generalizability research findings.