The Effects of Audit Firms Rotation: An Event Study in Chile

Antonio Aninat, Alvaro Bustos and Julio Riutort

No 470, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: In order to determine the market reaction to an announcement of a change in the audit firm, we carry on an event study between 2004 and 2013 that includes 130 publicly traded Chilean Companies. We find that the market reacted positively when a company announced that it will keep its audit firm that year. We rule out possible biases in the informational content of the event. This suggests that overall, the costs associated to a change of an audit firm (start-up cost and know how loss) would dominate the benefits of the same change (reduction in the probability of a value destroying event such as a fraud or an error). We discuss the implications of this result for the potential implementation of a rule of mandatory rotation in a developing country such as Chile. We also discuss the possibility of identifying the specific costs and benefits behind the audit firm change.

JEL-codes: G34 M42 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-acc and nep-cfn
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.economia.uc.cl/docs/doctra/dt-470.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:470

Access Statistics for this paper

More papers in Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile. Contact information at EDIRC.
Bibliographic data for series maintained by Jaime Casassus ().