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Public and private sector auditors and accruals quality in English NHS hospital Trusts

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Ballantine, Joan, Forker, John and Greenwood, Margaret (2008) Public and private sector auditors and accruals quality in English NHS hospital Trusts. British Accounting Review, 40 (1). pp. 28-47. [Journal article]

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DOI: 10.1016/j.bar.2007.09.002

Abstract

To promote auditor independence and audit quality in English NHS Trusts the Audit Commission regulates auditor rotation, fees and the appointment of its own and private sector auditors. NHS sanctioned departures from GAAP, some of which allow the financial breakeven target to be achieved, have been criticised by the Audit Commission as detrimental to financial discipline. In this paper, we investigate the association between abnormal accruals and the achievement of financial breakeven in NHS hospital Trusts over the period 1998–2005. We also investigate the association between abnormal accruals, audit fees and the Trusts audited by public and private sector auditors. We find evidence that abnormal accruals are used to achieve financial breakeven and they differ across different types of auditor. We also identify a negative relationship between abnormal accruals and NHS Trust star ratings. These findings raise questions about the‘quality’ of NHS audit where compliance with NHS-specific regulations overrides the wider GAAP-based requirement for financial statements to show a true and fair view and they warrant reconsideration of the nature of audit in NHS Trusts.

Item Type:Journal article
Faculties and Schools:Ulster Business School
Ulster Business School > Department of Accounting, Finance and Economics
Research Institutes and Groups:Business and Management Research Institute
ID Code:9008
Deposited By:Professor Joan Ballantine
Deposited On:20 Jan 2010 16:19
Last Modified:09 Nov 2012 11:44

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