This study investigates whether the tendency for audit clients to engage in opinionshopping becomes weaker after the enforcement of the Sarbanes-Oxley Act (SOX). WhileLennox (2000) provides evidence that U.K. firms successfully engage in opinion shopping, thereis limited evidence on the mitigating effect of SOX on opinion shopping. Using observationscollected from the period before and after the enforcement of SOX (year 2001, 2004 and 2005),we find that, for our sample period, firms are likely to switch (retain) their incumbent auditorswhen the likelihood of receiving a going concern opinion is lower (higher) from a successorauditor, suggesting evidence of opinion shopping. More importantly, we find that firms are lesslikely to engage in opinion shopping after the enforcement of SOX. These findings suggest thatmore stringent legal and audit environment in the post-SOX period, at least partially, restrictsfirms’ opportunistic behavior of shopping for a better audit opinion and enhances auditorindependence. These findings provide valuable implications to regulators as well as academiciansand practitioners.
Audit opinion shopping, Sarbanes-Oxley Act, auditor independence, going concern auditopinion.
Corporate Reporting and Disclosure
Korean Accounting Review
Korean Accounting Association
CHOI, Jong-Hag; CHUNG, Heesun; SONU, Catherine Heyjung; and ZANG, Yoonseok.
The impact of the Sarbanes-Oxley Act on clients’ audit opinion shopping behavior. (2016). Korean Accounting Review. 41, (3), 1-29. Research Collection School Of Accountancy.
Available at: http://ink.library.smu.edu.sg/soa_research/1624
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