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

See all articles by Dan S. Dhaliwal

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Phillip T. Lamoreaux

Arizona State University

Clive S. Lennox

University of Southern California

Landon M. Mauler

Florida State University - Department of Accounting

Multiple version iconThere are 2 versions of this paper

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

Dhaliwal, Dan S. and Lamoreaux, Phillip T. and Lennox, Clive and Mauler, Landon M., Management Influence on Auditor Selection and Subsequent Impairments of Auditor Independence During the Post-SOX Period (March 11, 2013). Available at SSRN: https://ssrn.com/abstract=2018702 or http://dx.doi.org/10.2139/ssrn.2018702

Dan S. Dhaliwal

University of Arizona - Department of Accounting (deceased)

Phillip T. Lamoreaux (Contact Author)

Arizona State University ( email )

Tempe, AZ 85287
United States

Clive Lennox

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Landon M. Mauler

Florida State University - Department of Accounting ( email )

Tallahasse, FL 32306
United States

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