Auditor Expertise in Mergers and Acquisitions

Auditing: A Journal of Practice and Theory, Forthcoming

54 Pages Posted: 9 Feb 2022 Last revised: 1 Mar 2022

See all articles by Ronen Gal-Or

Ronen Gal-Or

Bentley University - Department of Accountancy

Rani Hoitash

Bentley University - Department of Accountancy

Udi Hoitash

Northeastern University - Accounting Group

Date Written: February 7, 2022

Abstract

We contribute to the literature on auditor’s task-specific expertise by examining the role of auditor experience in mergers and acquisitions (M&A), a complicated and increasingly prevalent corporate event that can give rise to misreporting. We find that in industries with more complex accounting, clients of M&A expert auditors are less likely to experience M&A-related misstatements. In industries with less complex accounting, M&A experts pass audit fee savings to their clients during acquisition years. Additional analyses suggest that firms are more likely to switch to an M&A expert auditor during an acquisition year, but only in industries with complex accounting. Overall, our results suggest that firms with an acquisitive strategy that engage with M&A expert auditors experience improved M&A-related audit outcomes.

Keywords: Auditor expertise, mergers, acquisitions, auditor changes, audit quality, audit fees, industry complexity

JEL Classification: G34, M4, M41, M42

Suggested Citation

Gal-Or, Ronen and Hoitash, Rani and Hoitash, Udi, Auditor Expertise in Mergers and Acquisitions (February 7, 2022). Auditing: A Journal of Practice and Theory, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4028931 or http://dx.doi.org/10.2139/ssrn.4028931

Ronen Gal-Or

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452
United States

Rani Hoitash (Contact Author)

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452-4705
United States

HOME PAGE: http://www.xbrlresearch.com

Udi Hoitash

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States
671-373-5839 (Phone)

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