Audit Experts

Audit partners’ industry expertise

A study of the Dutch health-care sector

Nicole Obbens ANR: 541250 July 30, 2010

Master thesis Department of Accountancy Faculty of Economics and Business Administration Tilburg University, Tilburg, the Netherlands PricewaterhouseCoopers Accountants N.V., Breda, the Netherlands

Audit partners’ industry expertise

A study of the Dutch health-care sector

“Master thesis Department Accountancy, Faculty of Economics and Business Administration, Tilburg University”

Nicole Obbens ANR: 541250 July 30, 2010

Supervisor: Dr. S. Hollander Second reader: Dr. A. Yim

Organization: PricewaterhouseCoopers Accountants N.V. Supervisor: Drs. M.C. Oerlemans

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Table of contents

Abstract 1. Introduction 2. Introduction of the literature review 3. Hospital practices 3.1 Financing of Dutch hospitals 3.2 Third-party claim reserves 3.3 Manipulation of the third-party claim reserves 3.3.1 Earnings management in non-profit organizations 3.3.2 Agency problems in the non-profit sector 3.3.3 Budget maximization objective 3.3.4 Incentives for earnings management in the non-profit sector 3.3.5 CEO behaviour and incentives 4. Aspects of audit quality 4.1 Audit quality 4.2 Audit expertise 4.3 Auditors’ industry specialization 4.4 Auditors’ industry specialization and audit quality 4.5 Audit partners’ industry expertise 5. Hypothesis development 6. Research method 6.1 Data and sample selection 6.2 Proxy for industry expertise 6.3 Model and variable definitions 6.3.1 Regression model 6.4 Descriptives 7. Findings 7.1 Correlations 7.2 Regression analysis 7.3 Sensitivity tests 8. Conclusion References Appendix 1: Total sample Appendix 2: Solutions for data problems 5 6 11 13 13 14 15 15 16 17 17 20 22 22 23 25 26 28 30 36 36 37 39 41 43 47 47 49 54 57 59 66 69 4

Audit partners’ industry expertise A study of the Dutch health-care sector

Nicole Obbens Tilburg University

Abstract In this study, based on a sample of all Dutch...