Management Influence on Auditor Selection and Subsequent Impairments of Auditor Independence During the Post-SOX Period
56 Pages Posted: 9 Mar 2012 Last revised: 16 Mar 2013
There are 2 versions of this paper
Management Influence on Auditor Selection and Subsequent Impairments of Auditor Independence During the Post-SOX Period
Management Influence on Auditor Selection and Subsequent Impairments of Auditor Independence During the Post-SOX Period
Date Written: March 11, 2013
Abstract
This study investigates the influence of management over auditor selection decisions during a period in which audit committees have “direct responsibility” for auditor selection. We find that contrary to the intent of SOX, management continues to have significant influence over auditor selection and this is not mitigated by the presence of an apparently higher quality audit committee. As SOX presumes that management influence over auditor selection leads to negative outcomes, we also examine the impact that management influence has on proxies for subsequent auditor independence during the post-SOX period. We find that companies whose managers influence auditor selection are significantly less likely to receive going concern opinions, but no evidence of an impact on earnings management. We also find mixed evidence as to whether the relationship between management influence over auditor selection and subsequent audit quality is influenced by audit committee quality.
Keywords: Auditor independence, Auditor selection, Sarbanes-Oxley Act, Affiliations
JEL Classification: G18, G34, G38, M42
Suggested Citation: Suggested Citation
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