The Effects of Local Client Portfolio Characteristics on Auditor Resignation

• In Event: Local Markets and Auditor Changes

Abstract

In this study, we examine whether local (office-level) client portfolio characteristics affect auditors’ resignation decisions. Using a sample of auditor changes (including resignations and dismissals) during the period 2000 to 2011, we find that auditors’ local market share is positively associated with auditor resignations. Further analysis indicates that an audit firm with a large local market share is even more likely to resign in the presence of high litigation risk. We also find that office size is negatively, and client influence is positively, associated with resignations. Collectively, our results suggest that local factors are important in auditor resignation decisions.

Authors

• Thomas David Adams, Temple University

• Jagan Krishnan, Temple University

• Jayanthi Krishnan, Temple University