Do Spanish Firms Change Auditor to Avoid a Qualified Audit Report

In this paper we investigate whether Spanish firms employ deliberate strategies in the choice of auditor to avoid audit qualification. For a sample of 735 during the period 1991–96 we found no increase in the probability of changing auditor following an audit qualification. We concluded that this would be too obvious and detrimental to the firm's interests. However, 135 firms do change auditor during the period examined. We found that firms that have been qualified are significantly less likely to move to higher quality auditors than are unqualified firms, when that quality is measured by the specialisation of the auditor, auditor brand name, auditor size and auditor conservatism. For the 92 qualified firms changing auditor the likelihood of a subsequent qualification is significantly related to the quality of the auditor selected.

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