Determinants and consequences of auditor switching during fiscal year-end audit fieldwork

Bum Joon Kim, Vivek Mande, Myungsoo Son

Research output: Contribution to journalArticlepeer-review

Abstract

We compare a group of firms switching auditors while their annual audit is underway (LateSwitches) with two control groups: firms switching their auditors during the fourth quarter of the fiscal year and firms switching their auditors during the first three quarters. First, we find that LateSwitches tend to be riskier with regard to litigation risk, audit risk and business risk. Second, we find that LateSwitches have a higher chance of announcing restatements and receiving going concern opinions in the first year of audit with the successor auditor. Despite the higher risks, we fail to find that LateSwitches disclose more adverse events in Forms 8-K than other groups. We also document that stock market returns following an auditor change are more negative for LateSwitches. These results indicate that LateSwitches stand to face significant negative consequences when the relationship with their auditor is terminated abruptly in the final phases of an audit.

Original languageEnglish
Pages (from-to)91-108
Number of pages18
JournalInternational Journal of Auditing
Volume27
Issue number2-3
DOIs
StatePublished - 1 Apr 2023

Bibliographical note

Publisher Copyright:
© 2023 John Wiley & Sons Ltd.

Keywords

  • auditor switch timing
  • dismissal
  • Form 8-K
  • going concern opinion
  • restatement

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