Sandra Verbruggen

Audit report lags in the Belgian non-profit sector: an empirical analysis

In the current study, we examine audit report lags (ARLs) among a large sample of Belgian non-profit organisations (NPOs). Doing so, we (i) add to the very recent, but rapidly growing literature on financial reporting and auditing in the non-profit sector; and (ii) test the generalisability of findings regarding the ARL from the for-profit sector to the non-profit sector. We note that ARLs for Belgian NPOs are substantially larger than those reported in prior studies based on for-profit firms, which can be explained by differences in reporting incentives (e.g. the absence of capital markets pressures). In addition to determinants of the ARL that have been identified in prior studies based on for-profit firms (e.g. auditor business risk), we find that also the way of funding the organisation (i.e. the degree of reliance upon donations and/or grants) and its specific area of activity are significantly related to the ARL. The requirement of an external financial statement audit (together with new accounting and financial reporting requirements) for Belgian NPOs was only recently introduced (i.e. from 2006 onwards). We do not observe a decrease in ARLs in the two years after the introduction of the new legal obligations.

Analysis of Audit Fees for Nonprofits Resource Dependence and Agency Theory Approaches

In contrast to the extensive research on audit fees of for-profit companies, literature on nonprofit audit fees is limited. In this article, audit fee determinants are tested using a Belgian sample of nonprofits. We find that Big4 auditors charge fee premiums, and that nonprofit expert auditors charge lower fees when expertise is measured at audit partner level (as opposed to audit firm level). These findings hold after controlling for self-selection by using propensity score matching. We also address the resource dependence and agency characteristics of nonprofit audit clients and find that both are relevant in explaining audit pricing.

Nonprofit organizations’ choice in favor of a sector expert auditor: a study of behavioral choice criteria

From 2006 onwards very large Belgian nonprofit organizations (NPOs) are legally required to appoint an external auditor. In this context we investigate whether auditor choice in favor of a sector expert, being a higher quality auditor, is associated with NPOs’ expectations regarding several auditor attributes. We find that NPOs are more likely to choose a sector expert if they attach higher importance to an auditor’s client focus and relationship with management. NPOs are less likely to choose a sector expert if they care more about the practical execution of the audit. We provide recommendations for increasing the appeal of sector expertise as valuable auditor attribute. The resulting quality increase of NPOs’ financial statements and audit reports could benefit various stakeholders.