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From 2000 to 2007, 14 Chinese accounting firms had their audit licenses terminated or suspended for different reasons, forcing clients of these accounting firms to select new auditors within a short period of time. The purpose of this paper is to examine the auditor switching patterns and audit partner following decision of these clients and the effect of both client and (terminated or suspended) auditor characteristics on the auditor change decisions.

By using 245 (191) clients of terminated or suspended audit firms, the authors apply logistic regressions to investigate clients’ switching decision (following decision).

The empirical results indicate that state-owned enterprises tend not to switch to Big 4 audit firms; clients with dual shares tend to choose from the Big 4 for their succeeding audit firms. Moreover, companies whose preceding auditors received severe regulatory sanctions are less likely to switch to auditors of higher quality; companies who hired local auditors are more likely to follow their preceding audit partners as a result of forced auditor change.

This study enriches forced auditor change literature by discussing both clients’ and preceding auditor’s attributes on clients’ switching and following decisions.

The purpose of this study is to explore the effect of industry specialization on the absorption and competitive pricing (or lack thereof) of audits of large Andersen clients (S&P 1500 companies) who switched to the remaining Big 4 international accounting firms in 2002 due to the demise of Arthur Andersen LLP (Andersen). Did the audit clients pay a premium or discount in audit fees to their new auditor who specialized in their industry?

Ordinary least squares regression is used to test hypothesis of a positive association between industry specialization and audit fees charged to former Andersen's audit clients in 2002 following Andersen's demise. This study provides more control over size effects by design. Test variables are constructed based on national market share of audit fees within an industry. Logistic regression is used to examine the likelihood of choosing new auditor that is an industry specialist.

Results support hypothesis, consistent with auditor differentiation explanation. Proportion of clients that had engaged an industry specialist in 2001 increased from 38 percent (84 clients) to 48 percent (105 clients) in 2002. No evidence of price‐gouging in 2002 although clients who aligned with industry specialist paid a 23.2 percent premium in audit fees. Large clients lost bargaining power to negotiate lower fees. Findings are robust to the inclusion of additional alternative measures of company size.

Results of logistic regression analysis imply that large audit clients with former auditor of tarnished reputation, long auditor tenure and high leverage are more likely to switch to an industry specialist to possibly signal audit/financial reporting quality. Large sample companies may limit the ability to generalize findings to smaller companies.

Mandatory audit firm rotation (currently being debated in the profession) will have costly effect on the pricing of Big 4 audits for companies wanting to signal audit and financial reporting quality to affect market perception, and large companies would likely lose their ability to bargain for lower audit fees.

The paper focus on the alignment of Andersen clients and impact on audit fees with Big 4 industry specialists resulting from the sudden increase in audit market concentration. Prior to Andersen's collapse, evidence on the association of audit fees premium and industry specialists was mixed, and little attention has been given to the influence of auditor industry specialization on both audit fees and alignment of former Andersen clients with a Big 4 specialist. This paper fills that void.

The purpose of this paper is to examine if a conflict of interest arises when auditors opine on an internal control system that consists of an information system recently designed and implemented by their own firm.

A sample of companies was selected that had a financial information design and implementation service (FISD) disclosure in 2000‐2001 and a Section 404 internal control report issued in 2004‐2005. Both descriptive statistics and logistic regression results provide insight into the relation between the type of internal control report issued and the FISD provider.

After considering the type of auditor change (forced versus voluntary) and the timing of the consulting division split‐offs, the results suggest that a material weakness internal control report is less likely if the same audit firm issued the internal control opinion and performed the FISD service. This result lends some support to the regulator's concern that certain types of non‐audit services (NAS) may cause auditors to audit their own work.

This study contributes to the literature by examining if the performance of a certain type of NAS (FISD) resulted in auditors auditing their own work when opining on certain internal control systems. To the author's knowledge, this is the first study of its type in relation to auditors auditing their own work.

This paper aims to provide evidence on the hypothesis that auditors differ in how they constrain discretionary accruals (DAs) of their clients. The paper seeks to analyze changes in DAs for clients of Laventhol and Horwath associated with the appointment of a successor auditor.

The study uses regression and archival data to separate a firm's accounting accruals into discretionary and non‐DAs. The study then examines changes in a firm's DAs associated with a change in auditors.

Replacing LH with a new auditor resulted in a statistically significant decrease in DAs. This result is contrary to prior research and could be due to the prior research using voluntary auditor changes where variables such as financial distress and opinion shopping could drive the results.

The study provides results that differ from prior research. This study shows that the auditor change is associated with a systematic decline in the level of a firm's DAs. The results could be due to the forced nature of this auditor change as opposed to voluntary auditor changes used in prior research.

This study aims to examine the impact of COVID-19 public health restrictions on audit fees and audit delay at the auditor local office level.

The authors take advantage of the availability of the state-by-state lockdown data to measure the degree of public health restrictions in auditor office locations. Using multivariate regression analysis, this study empirically investigates the impact of the length of lockdown in auditors’ office locations on audit fees and audit delay. The authors also examine whether office-level characteristics (i.e. office size and office-level client importance) moderate the association between the length of statewide lockdown and both audit fees and audit delay.

The authors find that a longer lockdown in auditors’ office locations is associated with higher audit fees and longer audit delay. The increase in audit fees and audit delay due to lockdown is higher for clients of larger local offices than those of smaller offices. In contrast, the positive impact of lockdown on audit fees and audit delay is less for more economically significant clients of an auditor office than that for less significant clients. Smaller clients are more likely to bear the higher cost of audits and experience longer audit delay during the pandemic.

The results suggest that COVID-19 restrictions have forced auditors to change the nature, scope and timing of their tests, resulting in higher audit fees and longer delays in completing audit engagements. Beyond the main effect of lockdowns on audit fees and audit delay, the study finds evidence of the moderating effect of auditor office size and office-level client importance, providing some insights on how auditor local offices cope with COVID-19 restrictions.

The purpose of this paper is to examine what auditor and audit environmental attributes affect auditor appointment decisions in compulsory audit tendering, and whether the attributes affecting appointment of a new auditor (rotation) are consistent with or different from those affecting reappointment of the incumbent (retention).

New South Wales (NSW) local council finance managers were surveyed for importance ratings of 48 attributes. An hypothesis for differential ratings between rotators and retainers was formulated. Confirmatory factor analysis, tests of mean differences and logistic regression were used.

Consistent with the sample's high retention rate, the most important attributes for all respondents related to the quality of previous experience with the incumbent. Consistent with hypothesis, attributes proxying for a quality auditor (technical competence, independence and reputation) were more important for rotators.

The authors proxied rotation/retention by intention. Given the importance of audit quality attributes in the appointment decision and the high retention rate in compulsory audit tendering, future research could examine the relation between audit service quality attributes and retention.

This is the first study to examine attributes affecting auditor appointment decisions in a mandatory choice setting. NSW local councils provide a unique opportunity to do so as it is one of few jurisdictions in which compulsory audit tendering operates. Compulsory tendering may be implemented if current legislation aimed at improving audit independence and quality through mandatory partner rotation proves infeasible.

This paper aims to first investigate auditor change following mismatch by focusing on the number of times mismatch occurred prior to auditor change and on clients mismatched continuously with auditors for two or more years. Subsequently, it studies the relation of mismatch in the current year with auditor change for clients mismatched in the past year. These issues are important because of the call for regulatory intervention in auditor selection. If market forces achieve improvement in matching, then those forces should be relied upon in auditor selection.

This paper adapts the literature to estimate mismatch and uses logistic regressions on an auditor change model to study the timing of auditor change by mismatched clients and on a mismatch model to examine improvement in matching following auditor change.

This paper finds that the more frequent mismatches occurred in the past four years, the higher the likelihood of switching in the current year. Clients mismatched continuously for two or more years are more likely to change auditors. This paper also reports that mismatched clients who switch auditors are less likely to be mismatched again after the switch.

Because market forces reduce mismatch through auditor change, free choice by clients and auditors should be allowed, and regulatory intervention should be introduced cautiously. As investors and other users of financial statements have an interest in seeing that clients get the appropriate auditors for the audit, they will be assured that market forces could achieve the purpose. Thus, the results of this paper address public concern in the regulatory regime and support current audit market practices.

Prior studies assume a one-year time frame for auditor change to follow mismatch. This paper relaxes this assumption, to better reflect audit market practices, by showing that clients who are more often mismatched with auditors or those mismatched continuously for two or more years could also change auditors. Furthermore, prior studies find that mismatching motivates auditor change, but they do not show that matching improves after the change. This paper extends the literature by shedding new light to show that auditor change improves auditor–client matching.

The purpose of this paper is to examine the effect of the Enron scandal, Arthur Andersen's demise and the Sarbanes‐Oxley Act on audit fees.

The paper uses empirical methodology (univariate and multivariate).

Audit fees and the Big‐4 premium increased in 2002. Increase was larger for bigger and riskier clients. Evidence is also consistent with a competitive market for former Andersen clients.

Data requirements might bias the sample towards larger sized firms. Data availability limits the number of observations.

The research findings on audit fees in post‐Enron and Arthur Andersen period reported in this paper are important for policy makers.

It is found that the premium charged by Big 4 over non‐Big 4 has increased in 2002, and that the ability of an auditor to charge a premium is adversely affected when its reputation is tarnished. It is also reported that the frequency of voluntary switches within the Big 4 is lowest in 19 years. The audit fee model was also refined by adding two ownership variables to control for agency aspect of client firms; inside and institutional ownership.

This study aims to investigate the implications of audit industry specialization on auditor’s retention and growth within an emerging economy. Factors such as whether the firm is a Big 4, a firm with international affiliation, a local firm and the type of industry were studied to analyse the reasons behind audit firm retention and growth.

This research is based on a field study related to audit firms providing services to listed companies in an emerging economy. The sample includes the top 100 publicly held companies’ in the Egyptian stock market during 2006-2011 for which their annual reports are analysed to determine the audit firms’ retention and growth. An assessment of the continuity of the auditors and the increase in the number of audit clients were also measured.

The results confirm that industry specialization has an important effect on the auditor’s retention, especially for industries where capital investment is significant such as buildings, construction, financial services, housing and real estate. Big 4 audit firms retained their clients because of their industry specialization and brand name. Evidence was found that good knowledge of accounting and auditing standards resulted in audit firms with international affiliation competing with the Big 4 for clients’ retention and growth.

This study contributes to the existing literature, as it is among the first to provide empirical evidence on auditor retention, growth and auditor’s dominance in an emerging economy such as Egypt.

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.