Jeffrey R. Casterella
Colorado State University
Stephen P. Davies
Colorado State University
Laurence E. Johnson
Colorado State University
Barry L. Lewis
University of Colorado at Boulder
Abstract: GOVERNMENT VS. PRIVATE SECTOR AUDIT FEES:
AN EMPIRICAL COMPARISON
Abstract
Though it is widely accepted that audit fees for local governments are lower than those for corporate entities, this premise previously has not been empirically tested. We report a comparison of government audit fees with corporate audit fees for 1993. Our data include observations for 324 U.S. local governments and 487 corporations. We employ well-developed specifications for regression models of audit fees and compare the coefficients for variables representing auditee size, auditee complexity, and audit risk. We find that these determinants of fees essentially are similar between the public and private sectors. We further find that the intercept of the private-sector fee model is substantially higher than the intercept of the government fee model. Thus, there appears to be an unspecified influence that causes private sector audit fees to exceed government audit fees. This may represent a fee premium if private sector audits are thought of as riskier than government audits, and/or it may represent a propensity for audit providers to charge higher fees to corporate auditees simply because corporate entities are more able to pay higher audit fees.
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