Article2013

Is Corporate Governance A Determinant of Auditor Choice -Evidence From Turkey

40 citations0/0 files storedEge Akademik Bakis (Ege Academic Review)

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

External independent audit is an important component of strong corporate governance. The choice of independent external auditor is determined by several different factors. Besides all firm-specific factors, corporate governance might be a determinant of external auditor choice. The relation between auditor choice and corporate governance varies in accordance with the “substitution or complementary effect”. Firms may prefer to demand less effective and low quality audit and substitute the quality of audit services by a strong corporate governance structure. Alternatively, firms may demand a high quality audit in order to complement and support firms’ corporate governance structure. Therefore it is important to understand how a strong corporate governance structure is associated with auditor choice to reveal the effect of each corporate governance mechanisms on Big-4 and industry-specialist auditor choice. The main aim of this study is to investigate the association between corporate governance and auditor choice by using a sample of 805 firm-year observations from Istanbul Stock Exchange (ISE) between the years 2005-2009. Overall findings show that, firms’ auditor choice in terms of Big-4 and audit firm industry specialization is affected by the firm-level corporate governance mechanisms of firms, particularly, board of directors’ composition and ownership structure.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1993The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems 2000Investor protection and corporate governance 1985Positive Accounting Theory 2002Audit committee, board of director characteristics, and earnings management 1999What Do Industry-Specialist Auditors Know?2008Type of earnings management and the effect of ownership structure, firm size, and corporate-governance practices: Evidence from Indonesia 2000ACCRUAL MANAGEMENT TO MEET EARNINGS TARGETS: UK EVIDENCE PRE- AND POST-CADBURY

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2016Effects of borrowing costs, firm size, and characteristics of board of directors on earnings management types: a study at Borsa Istanbul 2017Choosing an external auditor: does the composition of boards of directors matter?2021The effect of ownership structure and board characteristics on auditor choice: evidence from Egypt 2022Corporate Governance and the Quality of Audit Process: An Exploratory Analysis Considering Internal Audit, Audit Committee and Board of Directors

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