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Corporate ethics and auditor choice – international evidence

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

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.

Suggested Citation

  • Houqe, Muhammad Nurul & van Zijl, Tony & Dunstan, Keitha & Karim, A.K.M. Waresul, 2015. "Corporate ethics and auditor choice – international evidence," Research in Accounting Regulation, Elsevier, vol. 27(1), pages 57-65.
    • Handle: RePEc:eee:reacre:v:27:y:2015:i:1:p:57-65
    DOI: 10.1016/j.racreg.2015.03.007
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    3. Konstantinos Petridis & Georgios Drogalas & Eleni Zografidou, 2021. "Internal auditor selection using a TOPSIS/non-linear programming model," Annals of Operations Research, Springer, vol. 296(1), pages 513-539, January.

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    More about this item

    Keywords

    Corporate ethics; Auditor quality; Board size;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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