Corporate ethics and auditor choice – international evidence

Muhammad Nurul Houqe, Tony van Zijl, Keitha Dunstan and A.K.M. Waresul Karim

Research in Accounting Regulation, 2015, vol. 27, issue 1, 57-65

Abstract: This paper examines whether firms' auditor choice reflects the strength of corporate ethics. Based on a sample of 132,853 firm year observations from forty-six countries around the globe during the period from 1998 to 2007 and controlling for a number of firm- and country-level factors, we find that firms in countries where “high corporate ethical values” prevail are more likely to hire a Big 4 auditor. We also find that the positive effect of home country corporate ethical values on the likelihood of hiring a high-quality auditor is reinforced by the extent of the firm's board size. These results establish an indirect link between corporate ethics and financial reporting quality through the firms' choice of auditor.

Keywords: Corporate ethics; Auditor quality; Board size (search for similar items in EconPapers)
JEL-codes: F23 G15 M41 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reacre:v:27:y:2015:i:1:p:57-65

DOI: 10.1016/j.racreg.2015.03.007

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