The impact of managing director changes and financial distress on audit qualification and auditor switching

Hudaib, M. and Cooke, T.E. (2005) The impact of managing director changes and financial distress on audit qualification and auditor switching. Journal of Business Finance and Accounting, 32(9-10), pp. 1703-1739. (doi: 10.1111/j.0306-686X.2005.00645.x)

Abstract

This study examines the interactive effects of change in managing director/chief executive officer (MD) and financial distress together with five control variables (type of audit firm; audit fees; gearing; time; and company size) on first, audit opinion and secondly on auditor switching. Based on a sample of 297 UK listed companies between 1987 and 2001, we find that companies that are financially distressed and change their MD are most likely to receive a qualified audit report, ceteris paribus. In addition, we find evidence of both familiarity and intimidation threats and that the probability of a switch increases with the severity of qualification.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Hudaib, Dr Mohammad
• Authors: Hudaib, M., and Cooke, T.E.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: Journal of Business Finance and Accounting
• ISSN: 0306-686X
• ISSN (Online): 1468-5957
• Published Online: 16 November 2005