Voluntary Demand for Auditing by Farm Businesses: An Australian Perspective

Peter Carey and George Tanewski ()
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George Tanewski: School of Accounting Economics and Finance, Deakin University, Australia

Journal of Accounting and Management Information Systems, 2013, vol. 12, issue 2, 213-234

Abstract: This study investigates voluntary demand for auditing by Australian farm businesses, a significant but relatively unexplored segment of the economy. Most farms operate as family partnerships or sole proprietors and we thus focus on incentives to audit arising from internal sources (owner-manager), controlling for traditional incentives arising from external contractual constraints (i.e., debt), organisational characteristics (i.e., size), and agency conflict. We hypothesise that an external audit assists management in enhancing internal control by complementing the process of profit planning and control (budgeting) and that increased family conflict provides an incentive to engage external audit. Of the 457 survey questionnaire respondents, 27% voluntarily engage an external auditor and 66% conduct some formal written planning. Results from logistic regression analyses support the predicted impact of both size and debt on audit, and further support the hypothesised impact of budgeting. The positive association between budgeting and audit confirms the complementary relationship. More importantly, this relationship is not confounded by the combined impact of size and budgeting and debt and budgeting on voluntary audit. In addition, family conflict has no impact on voluntary demand for auditing by farm business.

Keywords: Audit; budgeting; planning; farming; agency theory (search for similar items in EconPapers)
JEL-codes: M42 O13 Q13 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ami:journl:v:12:y:2013:i:2:p:213-234

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