The demand for external auditing: managerial share ownership, size, gearing and liquidity influences
The demand for external auditing: managerial share ownership, size, gearing and liquidity influences
Small companies with a turnover of up to £90,000 have been exempted from a compulsory audit since 1994. This paper is an investigation of why some small companies chose to continue with the audit whilst others abandoned it. The basic hypothesis of the paper is that a major reason why some small companies continue to be audited is to help control the conflict of interests among managers, shareholders, and outside creditors. Based on this analysis, the probability that a company will be audited voluntarily are predicted to increase as company size and gearing ratio increase, and to decrease as managerial share ownership and liquidity ratios increase. Univariate and multivariate tests were applied to the data of 92 small independent companies randomly selected from the Companies House CD?ROM database. The results from the two tests support the hypothesised effects of managerial share ownership, company size (turnover), and gearing ratio. There is no support for the company size (total assets) and liquidity ratio effects.
160-168
Tauringana, Venancio
27634458-b041-4bc1-94da-3e031d777e4f
Clarke, Steve
0ffd944e-c20f-482b-9bf0-65f4c14e52b5
2000
Tauringana, Venancio
27634458-b041-4bc1-94da-3e031d777e4f
Clarke, Steve
0ffd944e-c20f-482b-9bf0-65f4c14e52b5
Tauringana, Venancio and Clarke, Steve
(2000)
The demand for external auditing: managerial share ownership, size, gearing and liquidity influences.
Managerial Auditing Journal, 15 (4), .
(doi:10.1108/02686900010322353).
Abstract
Small companies with a turnover of up to £90,000 have been exempted from a compulsory audit since 1994. This paper is an investigation of why some small companies chose to continue with the audit whilst others abandoned it. The basic hypothesis of the paper is that a major reason why some small companies continue to be audited is to help control the conflict of interests among managers, shareholders, and outside creditors. Based on this analysis, the probability that a company will be audited voluntarily are predicted to increase as company size and gearing ratio increase, and to decrease as managerial share ownership and liquidity ratios increase. Univariate and multivariate tests were applied to the data of 92 small independent companies randomly selected from the Companies House CD?ROM database. The results from the two tests support the hypothesised effects of managerial share ownership, company size (turnover), and gearing ratio. There is no support for the company size (total assets) and liquidity ratio effects.
This record has no associated files available for download.
More information
Published date: 2000
Organisations:
Centre of Excellence for International Banking, Finance & Accounting
Identifiers
Local EPrints ID: 405367
URI: http://eprints.soton.ac.uk/id/eprint/405367
ISSN: 0268-6902
PURE UUID: 13ed9ee4-20b6-4d4c-b447-de94781bb322
Catalogue record
Date deposited: 07 Feb 2017 16:52
Last modified: 16 Mar 2024 03:58
Export record
Altmetrics
Contributors
Author:
Steve Clarke
Download statistics
Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.
View more statistics
