An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Yvonne Ellis
Morehouse College

Quinton Booker
Jackson State University

Abstract: This paper develops an audit fee model in the nonprofit sector of the audit market using Community Action Agencies (CAAs). The population includes 675 CAAs of fiscal year 2000 which met the requirements of the Single Audit Act Amendments of 1996. A final sample of 274 CAAs (41% response rate) is used to test the model. Our findings indicate that the model is highly significant (F value = 20.774; adjusted R square = .521). Six variables (size, financial opinion, complexity, contract type, auditor size, and auditor tenure) were found to be statistically significant in explaining the cross-sectional variation in audit fees across CAAs. Since CAAs operate with a limited amount of resources, the audit fee model developed in this study can serve as a tool for management in understanding and controlling cost associated with purchasing a service (external audit).

Keywords: audit fee; Single Audit Act; Community Action Agencies

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