Publication Type

Journal Article

Version

acceptedVersion

Publication Date

5-2019

Abstract

Despite regulatory concerns over opinion shopping (OS) behavior, there exists little systematic evidence on the prevalence and consequences of OS to avoid a going concern opinion (GCO). Using Lennox's (2000) framework to identify OS, we find that distressed firms successfully engage in OS to avoid a GCO. Moreover, clients engaging in OS exhibit a higher ex post Type II error rate in audit opinions than clients that do not, and the higher Type II error rate is salient for clients switching auditors for OS but not for clients retaining auditors for OS. We continue to find this asymmetric effect of the two types of OS on audit quality measured by restatements. These results indicate that auditor switching for OS not only results in a higher likelihood of audit reporting failures but also impairs other dimensions of audit quality, while auditor retaining for OS has little adverse effect on audit quality.

Keywords

opinion shopping, auditor switch, Type II errors, audit quality

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Governance, Auditing and Risk Management

Publication

Auditing: A Journal of Practice and Theory

Volume

38

Issue

2

First Page

101

Last Page

123

ISSN

0278-0380

Identifier

10.2308/ajpt-52154

Publisher

American Accounting Association

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.2308/ajpt-52154

Download

Share

COinS