Abstract
This paper analyzes whether the Financial Fair Play (FFP) regulations set by Union of European Football Associations (UEFA) have influenced the auditing fees charged to football clubs. In addition, it explores the determinants of audit fees. We used a two-sample t-test with equal variances to determine whether differences are present. After this, we carried out a panel data regression with the clubs fix effect to estimate the determinants of audit fees in football clubs. Our findings revealed an increase of audit fees after the implementation of FFP regulations. On top of that, audit fees were explained by the presence of foreign investors if the audit firm was one of the Big 4 and if the auditor was a woman. The regulation change has had an impact on the audit fees charged by auditors for their services. However, this increase may be compensated over future years given the improving financial situation of clubs; therefore, the auditors’ risk diminishes and subsequent audit fees may be reduced. UEFA should monitor audit fees as well as the quality of the audit reports, which have become crucial to obtaining the license to participate in UEFA competitions.
Highlights
Increasing debts and persistent deficits have characterized the financial situation of most of the European football clubs (Ascari and Gagnepain 2006; Barajas 2004; Barajas and Rodríguez 2010; Boscá et al 2008; Deloitte 2014; Gammelsæter 2010; García and Rodríguez 2003; Gay 2009a, 2009b; Robinson and Simmons 2014; Storm and Nielsen 2012)
Some results regarding the determinants of audit fees in football clubs corroborate what was expected
As it has been proven, the audit fees have grown in real terms after the implementation of Financial Fair Play (FFP) regulations
Summary
Increasing debts and persistent deficits have characterized the financial situation of most of the European football clubs (Ascari and Gagnepain 2006; Barajas 2004; Barajas and Rodríguez 2010; Boscá et al 2008; Deloitte 2014; Gammelsæter 2010; García and Rodríguez 2003; Gay 2009a, 2009b; Robinson and Simmons 2014; Storm and Nielsen 2012). Serious financial problems due to the imbalance between revenues and expenses and the subsequent increase in debt have affected European football; for this reason, some clubs are or have been on the edge of bankruptcy. Kuper and Szymanski (2009) pointed out that 40 professional English football clubs were involved in processes of insolvency between 1992 and 2008. Beech et al (2010) indicated that over half of the clubs in the Premier League and the English Football League Championship in season 2008–2009 had been insolvent over the last years. In Spain, at the end of 2011, 22 clubs were or had been under administration (Barajas and Rodríguez 2014)
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