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Fiscal year-end and non-lateral auditor switches

Author

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  • Nancy Chun Feng

Abstract

Purpose - – The purpose of this paper is to examine the potential effect of busy season resource constraints on the selection of a new auditor, conditioned upon the status of the prior auditor. Design/methodology/approach - – The paper employs multivariate logistic regressions for a sample of firms that changed auditors between 1979 and 2005 to explore the empirical correlations between having a December fiscal year-end (FYE) and non-lateral switches. Findings - – The paper finds that non-BigN clients with December FYEs are less likely to switch to BigN auditors than those with non-December FYEs prior to the enactment of the Sarbanes-Oxley Act (SOX). This trend subsides after SOX. For firms with BigN predecessor auditors, fiscal year-end appears to have insignificant influence on auditor switching. Research limitations/implications - – The findings suggest that upwardly mobile clients face greater audit supply constraints compared to clients already being audited by a BigN firm during the traditional busy season. However, the curbing influence on switching upwards erodes after SOX. Practical implications - – This study is to show the impact of supplier capacity constraints on audit production and structural changes within the auditing profession. Originality/value - – The findings can further the understanding of the determinants of auditor-client realignment, given that the paper identifies and explores the effects of having a December FYE on subsequent auditor appointments, conditioned upon the status of the prior auditor.

Suggested Citation

  • Nancy Chun Feng, 2013. "Fiscal year-end and non-lateral auditor switches," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 14(3), pages 268-292, November.
    • Handle: RePEc:eme:jaarpp:v:14:y:2013:i:3:p:268-292
    DOI: 10.1108/JAAR-05-2012-0041
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    Citations

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    Cited by:

    1. Katherine A. Gunny & Judith M. Hermis, 2020. "How Busyness Influences SEC Compliance Activities: Evidence from the Filing Review Process and Comment Letters," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 7-32, March.
    2. Höglund, Henrik & Sundvik, Dennis, 2016. "Financial reporting quality and outsourcing of accounting tasks: Evidence from small private firms," Advances in accounting, Elsevier, vol. 35(C), pages 125-134.

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