Informationally motivated auditor replacement

Ronald A. Dye*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

147 Scopus citations

Abstract

This paper studies a firm's decision to replace its auditor when the replacement affects outsiders' perceptions of its financial condition and auditors' attestations. If the auditor and firm possess common information about the firm's financial condition, and this information can be communicated through financial statements, then, quite generally, the auditor is never replaced. If the firm possesses information superior to that of the auditor and financial reports reflect only the auditor's information, then the auditor is more likely to be replaced the more favorable the firm's information and less favorable the auditor's information. Low-balling is explained by its effect on auditors' attest behavior, rather than by the cost differences of initial and repeat engagements.

Original languageEnglish (US)
Pages (from-to)347-374
Number of pages28
JournalJournal of Accounting and Economics
Volume14
Issue number4
DOIs
StatePublished - Dec 1991

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Informationally motivated auditor replacement'. Together they form a unique fingerprint.

Cite this