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Auditor Selection, Client Firm Characteristics, and Corporate Governance: Evidence from an Emerging Market
Mine H. Aksu,
Sabanci University
Turkan Onder, Sabanci University
Kemal Saatcioglu, Sabanci University
ABSTRACT. This study investigates the relationship between auditor choice and firm-specific client characteristics in the Istanbul Stock Exchange (ISE) firms, for the 1999-2004 period. We associate the auditor selection decision with the transparency & disclosure (T&D) and corporate governance compliance (CGC) scores while controlling for common determinants of auditor choice. We collect the data from annual reports, the ISE web site and measure T&D quality and compliance with CG Principles. We also test whether the T&D and CGC scores are predictors of the type of opinion rendered. The study contributes to the literature on the usefulness of T&D and CG rankings and auditor choice by using an emerging market where CG and T&D considerations have recently assumed great importance in alleviating the agency conflicts related to concentrated ownership. As such, the results will be useful for auditors, their clients and the regulators that have an oversight function over both.
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