Factors influencing auditor change: evidence from Malaysia

Abstract

Purpose

The purpose of this paper is to examine two factors which influence auditor change: audit and client firms’ characteristics, for Malaysian listed companies. Given the costs involved, it is important to understand the reasons why companies change their auditor and choose a particular level of audit assurance.

Design/methodology/approach

This study evaluates the effects of various independent variables on auditor change behaviour and the sensitivity of results to alternative period measurement by using logistic regression analysis.

Findings

An examination of 400 companies listed on the Bursa Malaysia (formerly known as Kuala Lumpur Stock Exchange‐KLSE) over a period of 18 years reveals auditor change to be significantly influenced by client firm's characteristics, notably changes in management, size of the client firm, complexity, and client's firm growth, lending support to the findings of previous survey studies.

Research limitations/implications

In the cause of brevity, a number of potentially important variables, that might enhance an understanding of auditor change behaviour in Malaysia, were not incorporated in the regression models, and might be considered in future studies.

Originality/value

The results presented in the paper have important implications for both the auditing profession and regulators in Malaysia.

Citation

Nazatul Faiza Syed Mustapha Nazri, S., Smith, M. and Ismail, Z. (2012), "Factors influencing auditor change: evidence from Malaysia", Asian Review of Accounting, Vol. 20 No. 3, pp. 222-240. https://doi.org/10.1108/13217341211263274