Thank You, Next: An Examination of Repeat Auditor Changes

57 Pages Posted: 21 Feb 2023 Last revised: 26 Nov 2024

See all articles by Brian Bratten

Brian Bratten

University of Kentucky - Von Allmen School of Accountancy

Samer Khalil

Murray State University

Wenyin Li

University of Kentucky

Date Written: November 26, 2024

Abstract

This study examines the determinants and consequences of repeat auditor changes. Approximately 55 percent of the auditor changes in our 2004 to 2020 sample period are repeat auditor changes, occurring less than eight years from the same client’s previous auditor change. Clients with repeat auditor changes have stronger economic motivations and are more likely to exhibit characteristics suggesting auditor dissatisfaction and client risks than those with single auditor changes. We find that clients generally realize fee savings through repeat auditor changes relative to single auditor changes. However, the market response to repeat auditor changes is more negative than single auditor changes. We highlight important differences between single and repeat auditor changes, and our results suggest that client firms fixating on fees should also consider the incremental market costs of repeat auditor changes. Our results also suggest that investors may benefit from additional disclosures about auditor changes beyond those currently required.

Keywords: auditor changes, dismissal, resignation, audit fees, market reaction

JEL Classification: M41, M42

Suggested Citation

Bratten, Brian and Khalil, Samer K. and Li, Wenyin, Thank You, Next: An Examination of Repeat Auditor Changes (November 26, 2024). Available at SSRN: https://ssrn.com/abstract=4360763 or http://dx.doi.org/10.2139/ssrn.4360763

Brian Bratten (Contact Author)

University of Kentucky - Von Allmen School of Accountancy ( email )

Lexington, KY 40506
United States
859-257-1947 (Phone)

HOME PAGE: http://gatton.uky.edu/faculty-research/departments/von-allmen-school-accountancy/directory

Samer K. Khalil

Murray State University ( email )

1375 Chestnut St.
Murray, KY 42071-0009
United States

Wenyin Li

University of Kentucky ( email )

Lexington, KY 40506
United States

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