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Auditor Reputation (auditor + reputation)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Who Cares about Auditor Reputation?,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2005
JAN BARTON
Abstract I provide evidence on the demand for auditor reputation by examining the defections of Arthur Andersen LLP's clients following the accounting scandals and criminal conviction marring the auditor's reputation in 2002. About 95 percent of clients in my sample did not switch auditors until after Andersen was indicted for criminal misconduct regarding its failed audit of Enron Corp. I test whether the timing of client defections and the choice of a new auditor are consistent with managers' incentives to mitigate potentially costly information and agency problems. I find that clients defected sooner, mostly to another Big 5 auditor, if they were more visible in the capital markets; such clients attracted more analysts and press coverage, had larger institutional ownership and share turnover, and raised more cash in recent security issues. However, my proxies for agency conflicts , managerial ownership and financial leverage , are not associated with the timing of defections or the choice of new auditor. Overall, my study suggests that firms more visible in the capital markets tend to be more concerned about engaging highly reputable auditors, consistent with such firms trying to build and preserve their own reputations for credible financial reporting. [source]

IPO Underpricing and Audit Quality Differentiation within Non-Big 5 Firms

INTERNATIONAL JOURNAL OF AUDITING, Issue 2 2007
Susan M. Albring
The choice of a non-Big 5 audit firm is optimal for some IPO companies. The choice of audit firm is important because auditor reputation may influence the pricing of the offering. This paper investigates the relationship between IPO underpricing and auditor compensation and proxies for non-Big 5 audit quality. We develop a continuous measure of auditor reputation based on factor analysis. This measure of auditor reputation is associated with lower IPO underpricing and higher auditor compensation, suggesting that auditor quality is an important determinant for firms hiring non-Big 5 auditors. We also examine the underlying constructs for auditor quality to determine their separate effects on IPO underpricing and auditor quality. Non-Big 5 national firms are associated with lower underpricing and higher auditor compensation, suggesting that these firms are perceived to be quality differentiated from non-national firms. SEC experience for non-national firms is associated with higher audit fees, suggesting this experience is perceived to be valuable. [source]

Country-Specific Risk and the Cost and Benefit of Audit Quality: Evidence from Israeli Initial Public Offerings in the United States

INTERNATIONAL JOURNAL OF AUDITING, Issue 3 2002
Edward B. Douthett Jr.
We examine audit fees and returns to auditor reputation for Israeli entrepreneurs making initial public offerings (IPOs) of equity in U.S. capital markets. We find that the cost of audit quality in terms of audit fees is higher, and the benefit of audit quality in terms of IPO proceeds is lower for a sample of Israeli IPOs matched to a control sample of U.S. IPOs. The results suggest that the higher levels of country-specific risk in Israel are modifying the cost and benefits of audit quality for Israeli entrepreneurs selling securities in the U.S. [source]

Who Cares about Auditor Reputation?,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2005
JAN BARTON
Abstract I provide evidence on the demand for auditor reputation by examining the defections of Arthur Andersen LLP's clients following the accounting scandals and criminal conviction marring the auditor's reputation in 2002. About 95 percent of clients in my sample did not switch auditors until after Andersen was indicted for criminal misconduct regarding its failed audit of Enron Corp. I test whether the timing of client defections and the choice of a new auditor are consistent with managers' incentives to mitigate potentially costly information and agency problems. I find that clients defected sooner, mostly to another Big 5 auditor, if they were more visible in the capital markets; such clients attracted more analysts and press coverage, had larger institutional ownership and share turnover, and raised more cash in recent security issues. However, my proxies for agency conflicts , managerial ownership and financial leverage , are not associated with the timing of defections or the choice of new auditor. Overall, my study suggests that firms more visible in the capital markets tend to be more concerned about engaging highly reputable auditors, consistent with such firms trying to build and preserve their own reputations for credible financial reporting. [source]