Governance and Non-Audit Services on Audit Fees: Evidence from the Insurance Industry

This paper adds to the existing audit pricing literature in three respects. First we focus our analysis on insurance companies thereby allowing us to compare the pricing of audits in mutual and proprietary companies. The different external ownership structure of mutual and proprietary insurers provides an ideal environment in which to explore the inuence of external gov-ernance on auditors ’ pricing decisions. Second, we examine the impact of board composition and audit committees on audit fees. Third, we analyse the impact of non-audit fees on audit fees. Data for the study were obtained from both statutory dis-closures and a postal questionnaire. Our results suggest that mutual insurers pay signicantly lower audit fees compared to their proprietary counterparts. We nd some evidence that the existence of an audit committee has a positive impact on audit fees paid by companies in the sample but we nd no evidenc