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Auditor changes and tendering: United Kingdom interview evidence

Research output: Contribution to journalJournal article

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Auditor changes and tendering : United Kingdom interview evidence. / Beattie, Vivien; Fearnley, Stella.

In: Accounting, Auditing and Accountability Journal, Vol. 11, No. 1, 1998, p. 82-98.

Research output: Contribution to journalJournal article

Harvard

Beattie, V & Fearnley, S 1998, 'Auditor changes and tendering: United Kingdom interview evidence', Accounting, Auditing and Accountability Journal, vol. 11, no. 1, pp. 82-98. https://doi.org/10.1108/09513579810207319

APA

Beattie, V., & Fearnley, S. (1998). Auditor changes and tendering: United Kingdom interview evidence. Accounting, Auditing and Accountability Journal, 11(1), 82-98. https://doi.org/10.1108/09513579810207319

Vancouver

Beattie V, Fearnley S. Auditor changes and tendering: United Kingdom interview evidence. Accounting, Auditing and Accountability Journal. 1998;11(1):82-98. https://doi.org/10.1108/09513579810207319

Author

Beattie, Vivien ; Fearnley, Stella. / Auditor changes and tendering : United Kingdom interview evidence. In: Accounting, Auditing and Accountability Journal. 1998 ; Vol. 11, No. 1. pp. 82-98.

Bibtex

@article{318656322604473583601b3d470e70b6,
title = "Auditor changes and tendering: United Kingdom interview evidence",
abstract = "Competitive pressures in the audit market have led to aggressive fee renegotiation and tendering by companies. This paper reviews microeconomic tender theory and finds it to be of limited value in the audit context. Content analysis of semi-structured interviews conducted with the finance directors of 12 UK listed companies which had recently tendered and/or changed auditor are used to investigate the tender/change process. Contrary to popular belief, fee levels do not necessarily dominate the decision to change auditors, rather changes within the client company, audit staffing, and auditor’s professionalism and competency issues dominate. Nor is the selection of a tender “winner” generally based solely on price, as predicted by tender theory and as would be expected when the consequences of audit failure do not fall on the directors. However, consistent with economic theory, the winning bid appears frequently to be too low, resulting in attempts by auditors to subsequently increase fees and resentment by the finance director. Directors generally appear to view the audit tender as relating to not only the attest function per se, but to a larger package of services concerning the financial reporting function. The relative importance of price versus non-price competition in auditor choice is found to vary across companies. Auditor choice is influenced strongly by both economic and behavioural factors, in particular, by directors’ assessment of the quality of non-attest services and the expected quality of working relationships, in addition to price and audit quality.",
keywords = "Audit, Auditing profession, Co-operation, Quality, Tendering , Value-for-money audit",
author = "Vivien Beattie and Stella Fearnley",
year = "1998",
doi = "10.1108/09513579810207319",
language = "English",
volume = "11",
pages = "82--98",
journal = "Accounting, Auditing and Accountability Journal",
issn = "0951-3574",
publisher = "Emerald Group Publishing Ltd.",
number = "1",

}

RIS

TY - JOUR

T1 - Auditor changes and tendering

T2 - United Kingdom interview evidence

AU - Beattie, Vivien

AU - Fearnley, Stella

PY - 1998

Y1 - 1998

N2 - Competitive pressures in the audit market have led to aggressive fee renegotiation and tendering by companies. This paper reviews microeconomic tender theory and finds it to be of limited value in the audit context. Content analysis of semi-structured interviews conducted with the finance directors of 12 UK listed companies which had recently tendered and/or changed auditor are used to investigate the tender/change process. Contrary to popular belief, fee levels do not necessarily dominate the decision to change auditors, rather changes within the client company, audit staffing, and auditor’s professionalism and competency issues dominate. Nor is the selection of a tender “winner” generally based solely on price, as predicted by tender theory and as would be expected when the consequences of audit failure do not fall on the directors. However, consistent with economic theory, the winning bid appears frequently to be too low, resulting in attempts by auditors to subsequently increase fees and resentment by the finance director. Directors generally appear to view the audit tender as relating to not only the attest function per se, but to a larger package of services concerning the financial reporting function. The relative importance of price versus non-price competition in auditor choice is found to vary across companies. Auditor choice is influenced strongly by both economic and behavioural factors, in particular, by directors’ assessment of the quality of non-attest services and the expected quality of working relationships, in addition to price and audit quality.

AB - Competitive pressures in the audit market have led to aggressive fee renegotiation and tendering by companies. This paper reviews microeconomic tender theory and finds it to be of limited value in the audit context. Content analysis of semi-structured interviews conducted with the finance directors of 12 UK listed companies which had recently tendered and/or changed auditor are used to investigate the tender/change process. Contrary to popular belief, fee levels do not necessarily dominate the decision to change auditors, rather changes within the client company, audit staffing, and auditor’s professionalism and competency issues dominate. Nor is the selection of a tender “winner” generally based solely on price, as predicted by tender theory and as would be expected when the consequences of audit failure do not fall on the directors. However, consistent with economic theory, the winning bid appears frequently to be too low, resulting in attempts by auditors to subsequently increase fees and resentment by the finance director. Directors generally appear to view the audit tender as relating to not only the attest function per se, but to a larger package of services concerning the financial reporting function. The relative importance of price versus non-price competition in auditor choice is found to vary across companies. Auditor choice is influenced strongly by both economic and behavioural factors, in particular, by directors’ assessment of the quality of non-attest services and the expected quality of working relationships, in addition to price and audit quality.

KW - Audit

KW - Auditing profession

KW - Co-operation

KW - Quality

KW - Tendering

KW - Value-for-money audit

U2 - 10.1108/09513579810207319

DO - 10.1108/09513579810207319

M3 - Journal article

VL - 11

SP - 82

EP - 98

JO - Accounting, Auditing and Accountability Journal

JF - Accounting, Auditing and Accountability Journal

SN - 0951-3574

IS - 1

ER -