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Please use this identifier to cite or link to this item: http://hdl.handle.net/1942/25770

Title: Auditor choice in private firms: a stakeholders perspective
Authors: Corten, Maarten
Steijvers, Tensie
Lybaert, Nadine
Issue Date: 2018
Citation: Managerial auditing journal, 33(2), p. 146-170
Abstract: Purpose – This paper aims to examine whether a private firm’s demand for a Big4 auditor is influenced by the auditor choice of its main supplier, customer and competitor. The authors rely on institutional theory to explain this stakeholders’ influence. The authors also examine whether the extent to which the firm’s board of directors engages in networking moderates this influence. Design/methodology/approach – Questionnaire data are combined with archival data of 210 Belgian private firms with a statutory audit requirement. Logistic regression analysis is applied to examine to what extent firms follow their main competitor, customer and supplier in hiring a Big4 auditor. Findings – The results reveal a positive association between the firm’s choice of a Big4 auditor and its main supplier being audited by a Big4 auditor, supporting the conformance effect (isomorphism) toward suppliers as hypothesized by institutional theory. The extent of board networking, however, seems to weaken this effect. Toward competitors, a divergence effect instead of a conformance effect is found, which indicates the existence of competitive differentiation regarding auditor choice. Research limitations/implications – While prior studies mainly focus on the agency relationships between shareholders, debtholders and managers to explain auditor choice, this study also takes into account the firm’s other main stakeholders by relying on institutional theory. Both the conformance effect toward suppliers as well as the divergence effect toward competitors provide interesting additional perspectives on why auditors are demanded, leading to interesting future research opportunities. Originality/value – This paper fulfills an identified need to consider additional theories in explaining audit outcomes.
URI: http://hdl.handle.net/1942/25770
DOI: 10.1108/MAJ-03-2017-1535
ISSN: 0268-6902
Category: A1
Type: Journal Contribution
Appears in Collections: Research publications

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