Publication Type

Journal Article

Publication Date

6-2016

Abstract

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.

Keywords

Audit opinion shopping, Sarbanes-Oxley Act, auditor independence, going concern auditopinion.

Discipline

Accounting

Research Areas

Corporate Reporting and Disclosure

Publication

Korean Accounting Review

Volume

41

Issue

3

First Page

1

Last Page

29

ISSN

1229-3288

Publisher

Korean Accounting Association

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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