HCBE Theses and Dissertations

Campus Access Only

All rights reserved. This publication is intended for use solely by faculty, students, and staff of Nova Southeastern University. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, now known or later developed, including but not limited to photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the author or the publisher.

Date of Award


Document Type

Dissertation - NSU Access Only

Degree Name

Doctor of Business Administration (DBA)


H. Wayne Huizenga School of Business and Entrepreneurship


Siew Chan

Committee Member

Yuliya Yurova

Committee Member

Chunhui (Maggie) Liu


This study uses an institutional theory perspective to examine whether significant changes to the audit work and engagement practices required under the Sarbanes-Oxley Act (SOX) lead to improved audit quality in nonprofit hospitals. Unlike their for-profit counterparts, nonprofit organizations have been subject to audits of internal controls over financial reporting and program compliance for decades under Circular A-133 of the Single Audit Act of 1984, as amended. Circular A-133 audits represent the primary accountability tool over the billions of grant dollars awarded annually by the federal government. Despite the enormity of these awards and the substantial informational effect of the audit reports, prior empirical research suggests that the quality of these audits is problematic.

Using the archival data of nonprofit hospital Circular A-133 audits and related hand-collected financial data from IRS Form 990s, bivariate and multivariate analyses are conducted on a cross-sectional sample of 875 audits for 141 nonprofit hospitals with audits during both pre-SOX (2001-2004) and post-SOX (2008-2011) periods. Audit quality is inferred from discretionary accruals (Modified Jones model) and auditor-reported internal control deficiencies (reportable conditions and material weaknesses).

The results indicate support for improved audit quality from the pre- to the post-SOX period for all measures of audit quality. The results are different for the measures of audit quality used to examine the association between audit firm size and audit quality. Non-Big 4 audit firms experienced a significant improvement in audit quality when discretionary accruals are used as a proxy for audit quality. Conversely, Big 4 audit firms experienced a significant improvement in audit quality when internal control deficiencies are proxies for audit quality. In the post-SOX period audit firms provide approximately the same level of audit quality regardless of firm size when discretionary accruals or material weaknesses are the proxy for audit quality. When reportable conditions are the proxy, non-Big 4 firms have higher audit quality than Big 4 firms post-SOX. Client characteristics, specifically hospital size and the interaction of leverage and risk, are attributable to differences in post-SOX audit quality. Finally, the study fails to support the hypothesis that large audit firms self-select low risk clients.

To access this thesis/dissertation you must have a valid nova.edu OR mynsu.nova.edu email address and create an account for NSUWorks.

Free My Thesis

If you are the author of this work and would like to grant permission to make it openly accessible to all, please click the Free My Thesis button.

  Contact Author

  Link to NovaCat