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Effect of outsourcing public sector audits on cost‐efficiency

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  • Kar‐Ming Chong
  • Colin Dolley
  • Keith Houghton
  • Gary S. Monroe

Abstract

This study compares the cost‐efficiency of ‘in‐house’ and outsourced to private sector audit supplier arrangements to deliver financial audits in the public sector by examining audit cost‐efficiency within the context of the public sector arrangement at one state in Australia (Western Australia). The results for 178 public agencies show that outsourced audits are, in general, more costly than in‐house audits, but this result is conditional on the type and size of public agency. Specifically, outsourced audits are more costly than in‐house audits for small statutory authority audits, whereas for specialist audits (i.e. hospitals) and large and complex statutory authority audits, the in‐house supply is equally efficient as the outsourced service.

Suggested Citation

  • Kar‐Ming Chong & Colin Dolley & Keith Houghton & Gary S. Monroe, 2009. "Effect of outsourcing public sector audits on cost‐efficiency," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(4), pages 675-695, December.
    • Handle: RePEc:bla:acctfi:v:49:y:2009:i:4:p:675-695
    DOI: 10.1111/j.1467-629X.2009.00302.x
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    References listed on IDEAS

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    Cited by:

    1. Michael E. Bradbury & Gary Monroe, 2017. "Large audit firm premium and audit specialisation in the public sector," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(3), pages 657-679, September.
    2. Carrera, Nieves & Mareque, Mercedes, 2023. "Does gender affect qualifying decisions? Evidence from public sector audits," Journal of Business Research, Elsevier, vol. 154(C).

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