Evidence on the Auditor and Client Relationship: What Can be Learned from Reasons Reported by Managers for Changing Auditors?

Whisenant, Scott

doi:10.2139/ssrn.205094

Cited by 8 publications

(6 citation statements)

References 10 publications

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“…Income‐decreasing accounting choices targeted towards minimising litigation risk by the auditor often characterise the last year with a predecessor auditor, while such discretionary accruals lose importance immediately in the first year of appointment of the new auditor (DeFond and Subramanyam, 1998). However, according to Whisenant and Sankaraguruswamy (2000a, b, c), accounting disagreements account for only a minimal percentage of client‐initiated auditor changes. This view supports earlier evidence by Beattie and Fearnley (1998a, b).…”

Section: Literature Reviewmentioning

confidence: 99%

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Factors contributing to auditor‐change decisions in Malta

Magri

Baldacchino²

2004

Managerial Auditing Journal

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Auditor changes are not alarmingly high in Malta but have been rising of late and the driving forces in this regard could be particular to a small‐island state. This paper seeks to elicit the perceptions of behavioural, economic or other factors that influence auditor‐client realignments in Malta. It does this mostly by a mail questionnaire responded to by 97 Maltese companies. Such findings were complemented by 15 interviews with companies that actually changed their auditor. The study concludes primarily that behavioural forces provide the principal motivators of auditor changes in Malta. Deterioration in the working relationship with the auditor and lack of accessibility feature as foremost concerns. Economic forces, albeit being important triggers of auditor changes, come only secondary in importance. Underlying this, there is evidence of differences in the attitudes of clients and non‐clients of Big 4 audit firms as well as between small and large companies.

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Section: Literature Reviewmentioning

confidence: 99%

“…This shift could mean a loss in the audit firm's competitive advantage with respect to that client, thus inducing a change in auditor. Indeed, factors relating to “structural changes” are major determinants of auditor changes (Whisenant and Sankaraguruswamy, 2000a, b, c).…”

Section: Literature Reviewmentioning

confidence: 99%

Factors contributing to auditor‐change decisions in Malta

Magri

Baldacchino²

2004

Managerial Auditing Journal

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“…Thus, the characteristics of the demand that explain this heterogeneity will depend on various factors such as; the complexity of the audit, the nature of the company's activity, the level of informational asymmetry, the capital structure, the level of agency costs, etc. (Jensen and Meckling, 1976;Francis and Wilson, 1988;Johnson and Lys, 1990;DeFond, 1992;Whisenant and Sankaraguruswamy, 2000). Based on this reasoning, a change in the environment of the activities of the companies can alter the demand requirements of the audit service, a situation that could cause a deterioration, in terms of the competitive advantage of the current auditor.…”

Section: The Change Of Auditor From a Market Perspectivementioning

confidence: 99%

The Change Of The Auditor Towards The Big Four Auditing Firms In Mexico

Moctezuma

Benau²

2018

ASSRJ

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In this paper, we present the results of an empirical study which analyzes the reasons why some companies with certain corporate characteristics, after having changed their external auditor, choose one of the Big Four auditing firms in Mexico. For this purpose, we have estimated a logistic regression model, using an observable sample of 972 annual reports, belonging to a total of 135 companies listed on the Mexican Stock Exchange, during the period from 2000 to 2007. The results indicate that the reputation of the external auditor, the quality of the audit, the brand of the audit firm and the size of the external auditor, are some of the reasons why some companies with certain corporate characteristics, after having changed their external auditor, choose one of the Big Four auditing firms in Mexico, better known in the business world, such as the "Big Four".

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“…The switching studies yield conflicting results. While some find that audit fees are the most frequently cited reason by clients for considering an auditor change Fearnley 1995, 1998;Whisenant 2003;Ettredge et al 2007;Brazel and Bradford 2011), other studies find that clients change audit firms more because of behavioral reasons (e.g., the auditorclient relationship) than economic reasons (Addams and Davis 1994;Addams et al 1996;Magri and Baldacchino 2004). In Eichenseher and Shields' (1983) study, clients cited audit fees and their working relationship with the audit firm as the most important reasons to change audit firms.…”

Section: Background and Literature Reviewmentioning

confidence: 99%

An Interview Study to Understand the Reasons Clients Change Audit Firms and the Client's Perceived Value of the Audit Service

Fontaine¹,

Letaïfa²,

Herda³

2013

Current Issues in Auditing

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SUMMARY Audit firms are concerned that clients perceive the audit service as a commodity, with little value added, resulting in clients switching to firms that offer lower fees. However, the auditing literature lacks qualitative insight from clients on the reasons that they change audit firms and their perceptions of the value of audit services. To better understand the client's perspective, we conducted interviews with 20 financial managers who participate in audit firm appointment decisions. Our results suggest that the quality of the auditor-client relationship is the key determinant of auditor switching and audit value. Interestingly, price becomes an important factor only when the auditor-client relationship is mismanaged (e.g., when clients perceive that their auditor is not available to them).

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Evidence on the Auditor and Client Relationship: What Can be Learned from Reasons Reported by Managers for Changing Auditors?

Cited by 8 publications

References 10 publications

Factors contributing to auditor‐change decisions in Malta

Factors contributing to auditor‐change decisions in Malta

The Change Of The Auditor Towards The Big Four Auditing Firms In Mexico

An Interview Study to Understand the Reasons Clients Change Audit Firms and the Client's Perceived Value of the Audit Service

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