Causes and Consequences of Audit Shopping: An Analysis of Auditor Opinions, Earnings Management, and Auditor Changes
Wallace N. Davidson et al.
What the paper says
Companies change auditors for a variety of reasons. At one end of the continuum, companies change auditors to improve operating performance. At the other, managers change auditors to enhance their own position. If auditor changes are driven by managerial opportunism, companies may increase their level of earnings management after the change. In this paper we reexamine prior research in earnings management that surround auditor changes (DeFond and Subramanyam, 1998) and extend prior work by examining earnings management and auditor changes while controlling for prior audit opinion. We find that, on average, earnings management does not increase following auditor changes. We do find, however, that the level of earnings management is larger for companies that switch from Big Six to non-Big Six auditors following the receipt of a modified audit opinion from their original auditor.
53 citations
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.55 × 0.4 = 0.22 |
| M · momentum | 0.61 × 0.15 = 0.09 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.