Factors associated with the choice of a quality auditor when audit tendering is compulsory

Kym Boon, Jill McKinnon, Philip Ross

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contribution

Abstract

This paper uses data from the Australian local government context to investigate the factors that are associated with the choice of a quality auditor when audit tendering is compulsory. Three auditor choice decisions are examined: (i) appointment of a Big N or non-Big N auditor, (ii) appointment of a specialist or non-specialist auditor, and (iii) appointment of a new auditor (rotation) or reappointment of the incumbent audit firm (retention). The study uses annual report and other publicly available data for 125 local councils in the Australian state of New South Wales (NSW) over the ten year period 1993-2003. Appointment decisions are examined for two successive tenders (in the fiscal years 1995 and 2001). As expected, the study finds size, political visibility, location and audit risk to be associated with appointment of a quality audit firm. Political visibility, location, growth, incumbent auditor and audit partner change are found to be associated with auditor rotation/retention decisions. Local councils in NSW used the compulsory audit tendering opportunity to increasingly align themselves with a specialist auditor. Councils that were more politically visible were also found to be more highly aligned with a specialist auditor. The results are not consistent with competitive tendering leading to choice of a lower quality auditor.
Original languageEnglish
Title of host publication2007 AFAANZ conference
Subtitle of host publicationpapers
Place of PublicationGold Coast, Qld.
PublisherAccounting and Finance Association of Australia and New Zealand
Number of pages67
Publication statusPublished - 2007
EventAccounting Association of Australia and New Zealand Conference (2007) - Gold Coast, Qld.
Duration: 1 Jul 20073 Jul 2007

Conference

ConferenceAccounting Association of Australia and New Zealand Conference (2007)
CityGold Coast, Qld.
Period1/07/073/07/07

Keywords

  • auditor choice
  • audit quality
  • Big N audit firm
  • specialist audit firm
  • local government (municipal) audit

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