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The purpose of this paper is to examine the potential effect of busy season resource constraints on the selection of a new auditor, conditioned upon the status of the prior auditor.

The paper employs multivariate logistic regressions for a sample of firms that changed auditors between 1979 and 2005 to explore the empirical correlations between having a December fiscal year-end (FYE) and non-lateral switches.

The paper finds that non-BigN clients with December FYEs are less likely to switch to BigN auditors than those with non-December FYEs prior to the enactment of the Sarbanes-Oxley Act (SOX). This trend subsides after SOX. For firms with BigN predecessor auditors, fiscal year-end appears to have insignificant influence on auditor switching.

The findings suggest that upwardly mobile clients face greater audit supply constraints compared to clients already being audited by a BigN firm during the traditional busy season. However, the curbing influence on switching upwards erodes after SOX.

This study is to show the impact of supplier capacity constraints on audit production and structural changes within the auditing profession.

The findings can further the understanding of the determinants of auditor-client realignment, given that the paper identifies and explores the effects of having a December FYE on subsequent auditor appointments, conditioned upon the status of the prior auditor.

This study aims to examine whether the industry characteristics of homogeneity, product competition, high auditor competition and accounting standards complexity are associated with auditor changes.

Logistic regressions test for significance of the industry characteristics on resignations, dismissals and directional changes to and from Big 4 and nonBig 4 auditors after controlling for client, auditor and engagement factors.

The authors report a lower likelihood of auditor resignations with greater accounting standards complexity. The authors also report a greater likelihood of auditor dismissals with greater industry homogeneity, greater product competition and greater auditor competition. Results also show that accounting standards complexity is associated with a lower likelihood of changes from Big to nonBig auditors, and industry homogeneity is associated with a greater likelihood of changes from Big to nonBig. Also, greater auditor competition is associated with a lower likelihood of changes from nonBig to Big auditors.

Prior research has established the importance of industry characteristics to the market for audit services (Cairney and Stewart, 2015; Wang and Chui, 2015; Cahan et al., 2011; Bills et al., 2015). The authors report that industry characteristics also impact auditor changes. Second, previous research has used various methods that indicate general industry effects on changes. The paper contributes to this research by specifying industry characteristics. Limitations include the reliance on the self-reporting in 8-Ks to identify auditors resigning and firms dismissing auditors. Also, the paper relies on proxies for industry characteristics that were developed in prior research.

Regulators have expressed concern over the relatively low rates of auditor changes and the problem of lack of auditor choice. By demonstrating a significant effect of industry characteristics on changes, the authors indicate some levers that may be available to influence rates of auditor changes, especially realignments to nonBig.

This is one of the first studies to examine how specific industry characteristics impact auditor changes. The study may be of interest to academics who are interested in how industry factors influence auditor changes. It may also interest policymakers who could lever the characteristics of industries to address concerns about the low rates of auditor changes.

The purpose of this study is to examine whether lengthy audit delays lead to auditor changes in the subsequent year. The paper hypothesizes that a lengthy interaction between clients and their auditors reflects high audit risk factors relating to management integrity, internal controls, and the financial reporting process. It argues that auditors are more likely to drop clients with long audit delays because they would like to avoid these types of audit risks.

Using logistic regressions, the paper first tests whether a lengthy audit delay leads to an auditor change. It then examines whether as audit delays increase, auditor changes are more likely to be downward than lateral.

The results support the hypothesis that Big N auditor‐client realignments occur following long audit delays. Further, as the length of the delay increases, the paper finds that there are more downward changes.

An implication of our study is that a long audit delay represents a publicly observed proxy for the presence of audit risk factors that lead to an auditor change.

This study suggests that all else constant, investors should consider a lengthy audit delay as indicating that there has been deterioration in the quality of the client‐auditor interaction. An audit delay also presents an observable proxy for successor auditors to consider while evaluating risks associated with a new client.

The results of our study increase our understanding of how Big N auditors manage their client portfolios to mitigate their exposure to risk factors.

Auditor changes are not alarmingly high in Malta but have been rising of late and the driving forces in this regard could be particular to a small‐island state. This paper seeks to elicit the perceptions of behavioural, economic or other factors that influence auditor‐client realignments in Malta. It does this mostly by a mail questionnaire responded to by 97 Maltese companies. Such findings were complemented by 15 interviews with companies that actually changed their auditor. The study concludes primarily that behavioural forces provide the principal motivators of auditor changes in Malta. Deterioration in the working relationship with the auditor and lack of accessibility feature as foremost concerns. Economic forces, albeit being important triggers of auditor changes, come only secondary in importance. Underlying this, there is evidence of differences in the attitudes of clients and non‐clients of Big 4 audit firms as well as between small and large companies.

The purpose of this study is to examine whether the timing of auditor terminations signals the riskiness of client firms.

This empirical study uses a sample of auditor switches during 2003-2014 to conduct univariate tests and multivariate regression analyses. Auditor switches occurring after the audit report date but before the shareholders’ meeting are classified as “planned” terminations and auditor switches that occur outside of this window are classified as “abrupt” terminations.

First, abrupt terminations are more strongly related to client risk factors than planned terminations. Second, relative to planned terminations, abrupt terminations are more likely to result from an auditor resignation rather than a client dismissal. Third, abrupt termination firms are more likely to have internal control weaknesses and experience delistings in the following year. Future operating performance is also worse after an abrupt termination. Finally, auditors and investors view abrupt terminations as riskier than planned terminations.

As the timing of the auditor termination is publicly available information, it can provide an important signal of deteriorating financial performance to shareholders and potential investors. Abrupt terminations could be costly to shareholders because those firms likely have lower quality financial reporting (due to internal control weakness) and deterioration of future operating performance.

While concurrent studies investigate the relation between the timing of new auditor appointment and audit quality, this is the first study to document the relation between the timing of auditor termination and the riskiness of client firms.

This paper investigates the impact of the PricewaterhouseCoopers (PwC) merger in Australia on existing and potential clients of the new merged firm. From prior theory it is expected that some existing clients may have an incentive to switch away from a newly merged firm as the same larger firm now audits close competitors once audited by separate firms. Prior theory also suggests that another group of potential clients should be attracted to the newly merged firm where the merger enhances or creates industry specializations. The expectation is that in both of these instances there will be increased switching activity associated with the newly merged audit firm. Contrary to expectations, a significantly lower level of switching behaviour was observed for the newly merged firm compared with that of the other Big 5 firms, suggesting that an advantage of enhanced specialization may not be the attraction of new clients but the retention of existing clients. When comparing the nature of the switches, some support was found for the view that the switches to the new firm were likely to be in enhanced areas of specialization, but no evidence was found to suggest that close competitors would switch away from this firm. The greater rate of retention of clients compared with other Big 5 firms was not associated with a more competitive audit pricing policy.

The purpose of this paper is to examine the relationship between market structure, competition and pricing in the UK accounting services market. This association is important because mergers amongst the leading firms and the collapse of Arthur Andersen have reduced the number of international accounting firms to four.

The paper examines concentration ratios (CR) and the fees charged by accounting firms. The data used encompass the period when the number of leading suppliers fell from eight to four.

FTSE100 consultancy fees increased rapidly in the 1990s. Independence concerns, corporate scandals and additional legislation contributed to a sharp increase in audit fees and a significant decrease in consultancy fees since the turn of the century. The international accounting firms responded to saturation of the FTSE100 market by targeting the small and medium‐sized client sectors as avenues for further growth. The audit market is competitive at the initial tender stage but concentration has allowed firms to significantly increase audit fees on repeat engagements.

A number of theoretical and empirical limitations are acknowledged that could further increase the statistical power of the tests.

The study should be of interest to regulatory bodies, auditors, audit clients and academics.

This paper fills a gap in the literature regarding the evolution of CRs and accounting service fees over a significant time frame.

While concentration measures are a good indicator of market structure, the link with competitiveness is more complex than often assumed. In particular, the modern theory of industrial organisation makes no clear statement regarding the impact of concentration on competition ‐ the focus of this paper is concentration and no inferences are made about competitive aspects of the market. The extent and nature of concentration within the UK listed company audit market as at April, 2002 and, pro forma, after the collapse of Andersen is documented and analysed in detail (by firm, market segment and industry sector). The largest four firms held 90 per cent of the market (based on audit fees) in 2002, rising to 96 per cent with the demise of Andersen. A single firm, Pricewaterhouse‐Coopers, held 70 per cent or more of the share of six out of 38 industry sectors, with a share of 50 per cent up to 70 per cent in a further seven sectors. The provision of non‐audit services (NAS) by incumbent auditors is also considered. As at April 2002, the average ratio of non‐audit fees (paid to auditor) to audit fees was 208 per cent, and exceeded 300 per cent in seven sectors. It is likely, however, that disposals by firms of their management consultancy and outsource firms, combined with the impact of the Smith Report on audit committees will serve to reduce these ratios. Another finding is that audit firms with expertise in a particular sector appeared to earn significantly higher nonaudit fees from their audit clients in that sector. The paper thus provides a solid empirical basis for debate. The subsequent discussion considers the implications for companies and audit firms of the high level of concentration in the current regulatory climate, where no direct regulatory intervention is planned.

The implementation of compliance procedures associated with the Sarbanes‐Oxley Act of 2002 came at a great cost to most publicly‐traded firms, largely due to the internal control disclosures required by Section 404 of the Act. The purpose of this paper is to contribute to the inquiry on internal control effectiveness by examining the impact of the type (same or different) and number of internal control weaknesses on audit fees. The paper also examines whether firms that remediate continue to incur higher audit fees compared to firms that never disclosed a weakness.

The authors evaluate the impact of internal control weaknesses and their remediation on audit fees using ordinary least squares regression for 9,122 firm year observations (3,096 unique firms) over the time period 2004‐2007.

The authors find: an incremental impact on audit fees of additional material weakness disclosures; firms that report the same material weakness pay higher fees than firms reporting a different material weakness in consecutive years; and audit fees remain high one, two, and three years following remediation compared to a firm that never disclosed an internal control weakness.

In contrast with prior studies, the sample includes firms that remediated weaknesses, firms that failed to remediate weaknesses, and firms that did not have prior weaknesses. The results suggest that the failure to remediate has greater risk implications than new weaknesses and that material weaknesses are associated with higher audit fees several years after remediation.

The objective of this research study is to investigate the impact of auditor dismissals and resignations on commercial lending decisions. The study also examines whether a reason given for a dismissal or resignation affects commercial lending decisions. Eighty-five commercial loan officers were given a scenario involving a hypothetical company loan applicant and were first asked to assess the level of risk associated with granting a line of credit. Next, they were asked to assess the probability that they would grant the line of credit. Five different questionnaire versions were created by varying information about an auditor change and the reason for the change. The study finds that risk assessments of and the probability of granting credit to the applicant company do not significantly differ due to knowledge about auditor changes. In addition, participants did not view auditor resignations differently than auditor dismissals. Finally, disclosure of a disagreement as a reason for an auditor change did not have an impact on lending decisions.