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Auditor Switches (auditor + switch)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Corporate Governance, Audit Firm Reputation, Auditor Switches, and Client Stock Price Reactions: The Andersen Experience

INTERNATIONAL JOURNAL OF AUDITING, Issue 3 2010
Sharad C. Asthana
The financial scandal surrounding the collapse of Enron caused erosion in the reputation of its auditor, Arthur Andersen, leading to concerns about Andersen's ability to continue in existence and ultimately to the firm's demise. In this paper we investigate the role of corporate governance on the timing of the auditor switch by former Andersen clients. After controlling for factors associated with switching costs, we find clients with strong corporate governance were more likely to switch early. We also find that clients switching from Andersen experienced positive abnormal returns during the three-day window surrounding the announcement of the switch. We attribute this positive response to the reduction in uncertainty associated with the cost of finding a new auditor. [source]

Auditor Opinion Shopping and the Audit Committee: An Analysis of Suspicious Auditor Switches

INTERNATIONAL JOURNAL OF AUDITING, Issue 1 2001
Deborah Archambeault
This study examines whether audit committee effectiveness characteristics are related to suspicious auditor switching. Using the agency and audit committee literature, we hypothesize that audit committee existence, the proportion of independent directors, member experience in accounting, auditing, and finance, number of committee meetings, and number of committee members should be inversely related to suspicious auditor switching. A sample of 60 matched U.S. firms was evaluated along the hypothesized dimensions after controlling for company size, industry, stock exchange, financial health, and management stock ownership. Collectively, univariate and logistic regression results provide support for our predictions. The findings indicate that suspicious switchers: (1) are less likely to have an audit committee, (2) have a smaller percentage of independent directors on the audit committee, (3) have fewer members with experience in accounting, auditing, or finance, (4) hold fewer audit committee meetings, and (5) have smaller audit committees than nonsuspicious switching companies. Exploratory analyses also reveal that audit committees for companies with suspicious switches had younger members, and fewer members with no stock ownership in the company served. [source]

Market Implications of the Audit Quality and Auditor Switches: Evidence from China

JOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2009
Z. Jun Lin
Independent audits enhance the credibility of corporate financial reports and assist investors to make rational decisions in the capital market. Nonetheless, the utility of the auditing function depends upon the quality of audits, which is determined by the independence and expertise of auditors. Hence, auditor choice and switch will not only affect an audit's quality, but will also influence decisions made by investors and other market participants. The purpose of this paper is to investigate how investors respond to the quality of audits and auditor switches in the Chinese context. Empirical results show that the quality of an audit and switching to a larger auditor have a positive (negative) impact on earnings response coefficients (ERCs) for firms with positive (negative) abnormal earnings. In contrast, switching to a smaller auditor has a negative (positive) impact on ERCs for firms with positive (negative) abnormal earnings. These results suggest that large auditing firms (Top 10) in China are perceived as more effective for curbing income-increased earnings management, which leads to higher (lower) ERCs for clients with positive (negative) abnormal earnings. Firms' switching to a larger auditor may signal high-quality earnings. Therefore, investors more often increase stock prices when firms have positive abnormal earnings and less often depreciate prices for negative abnormal earnings. Similarly, switching to a smaller auditor may signal lower earning quality, resulting in opposite market responses. In general, the empirical evidence suggests that audit information is valued by the capital market in China. Large auditing firms have been able to product-differentiate themselves within the Chinese stock market. [source]

Corporate Governance, Audit Firm Reputation, Auditor Switches, and Client Stock Price Reactions: The Andersen Experience

Propensity to Switch Auditors and Strictness of Legal Liability Environment: The Role of Audit Mispricing

INTERNATIONAL JOURNAL OF AUDITING, Issue 3 2007
Juha-Pekka Kallunki
This article investigates whether firms paying relatively high audit fees are more likely to switch auditors. Moreover, we investigate whether the legal liability environment affects the propensity to switch auditors owing to audit fee under- and/or over-pricing. Our empirical results from analysing the Compustat Global Vantage data from ten countries show that the over-pricing of auditing services increases the likelihood of auditor switches. We also find that a greater degree of under-pricing of auditing services in the initial audit engagement year is required to cause an auditor switch in countries with a stringent legal environment as opposed to countries with a lax legal environment. All the results remain unchanged after controlling for numerous firm and country differences. [source]