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The Level of Audit fees - current issue in Auditing with special emphasis to FTSE 100 Companies in UK - Essay Example
Finance & Accounting
Pages 13 (3263 words)
The study affirms that level of audit fees is seemed to be higher as there is a high market concentration. During the reappointment process of auditors, there has been some bargaining on the level of fees charged by the auditor as there is some level of price sensitivity among companies…
According to the research findings in UK, the level of audit fees is seemed to be higher as there is a high market concentration, especially in the FTSE 100 sector. Through UK market data study of 1999-2006, Holland and Lane found that shareholders are of the opinion that auditor’s independence will be at stake due to high level of both audit and NAS fees. However, the research study carried out by Srinidhi & Gul, Abbott et al. and Carcello et al., the quality of audit is gauged by the quantum of audit fees paid to an auditor of a company. Higher audit engagement effort is reflected by high levels of audit fees and would always result in better audit quality. In case of risk prone companies, the auditor has to incur insurance cost which in turn result in an increase in the audit fees. Further, the level of audit fees might have increased substantially due to changes in the general economic scenarios and due to change in regulations and rules pertaining to audit. Further, the auditor independence will be at jeopardy if he has been awarded with substantial non-audit work also like consultancy services, accounting services, internal audit, corporate transactions, internal audit, regulatory compliances, merger and acquisitions, advise on restructuring and advise on taxation. It is to be noted that higher audit fees always result in supporting the corporate frauds.Researchers have pointed out that Arthur Andersen have received $27 million for their audit services in addition to $29 million for non-audit services from Enron in 2000. ...
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