Download This PaperCommon Auditors in Mergers and Acquisitions: Post-Acquisition Financial Reporting Quality and Audit Fees
Contemporary Accounting Research, 0[10.1111/1911-3846.70000]
37 Pages Posted: 28 May 2020 Last revised: 18 Sep 2025
Date Written: January 1, 2022
Abstract
Prior research documents that mergers and acquisitions (M&As) result in significant financial reporting risks. In this paper, we examine whether acquirers that share a common auditor with the target experience higher post-acquisition financial reporting quality (FRQ) and reduced audit fees. We find that same-office, but not different-office, common auditors are associated with improved post-acquisition FRQ, as evidenced by a decreased likelihood of misstatement, lower F-Score, and a lower likelihood of meeting or just beating analyst forecasts. We also find that same-office common auditors are associated with a lower percentage change in audit fees. In additional tests, we find that these inferences are robust to limiting the sample to acquirers with multiple acquisitions or to acquirers and targets with no auditor switches in the prior three years. Together, our findings suggest that same-office common auditors facilitate knowledge-transfer about the target and provide important post-acquisition benefits.
Keywords: common auditors, same-office common auditors, financial reporting quality, financial statement misstatements, mergers and acquisitions, audit fees
JEL Classification: M40; M41
Suggested Citation: Suggested Citation