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The pricing of audit and non-audit services in a regulated environment: a longitudinal study of the UK life insurance industry

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  • Paul Klumpes
  • Iliya Komarev
  • Konstantinos Eleftheriou

Abstract

This paper studies the relationship between audit and non-audit service fees paid to the statutory auditor by UK life insurance firms, utilising an extensive panel-data sample set for the period 1999--2009. Consistent with a knowledge spillover (impairment of independence) hypothesis, we predict and find that audit fees are positively (negatively) associated with actuarial (tax service) fees. Additionally, our results indicate that regulatory changes enforced after 2004 deterred UK life insurance firms from purchasing non-audit services that are perceived to impair auditor independence. Finally, we find evidence concerning the inter-temporal determination of audit fees.

Suggested Citation

  • Paul Klumpes & Iliya Komarev & Konstantinos Eleftheriou, 2016. "The pricing of audit and non-audit services in a regulated environment: a longitudinal study of the UK life insurance industry," Accounting and Business Research, Taylor & Francis Journals, vol. 46(3), pages 278-302, April.
  • Handle: RePEc:taf:acctbr:v:46:y:2016:i:3:p:278-302
    DOI: 10.1080/00014788.2015.1056719
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    Cited by:

    1. Garcia-Blandon, Josep & Argiles-Bosch, Josep Maria & Castillo-Merino, David & Martinez-Blasco, Monica, 2017. "An Assessment of the Provisions of Regulation (EU) No 537/2014 on Non-audit Services and Audit Firm Tenure: Evidence from Spain," The International Journal of Accounting, Elsevier, vol. 52(3), pages 251-261.
    2. Polemis, Michael L., 2016. "New evidence on the impact of structural reforms on electricity sector performance," Energy Policy, Elsevier, vol. 92(C), pages 420-431.
    3. Sarhan, Ahmed A. & Ntim, Collins G. & Al-Najjar, Basil, 2019. "Antecedents of audit quality in MENA countries: The effect of firm- and country-level governance quality," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 35(C), pages 85-107.
    4. Al-Okaily, Jihad & BenYoussef, Nourhene, 2020. "Audit committee effectiveness and non-audit service fees: Evidence from UK family firms," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 41(C).

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