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Evidence of Opinion Shopping in the U.S.
Ferdinand A Gul,
The Hong Kong Polytechnic University
Kam - Wah Lai, The Hong Kong Polytechnic University
Heibatollah Sami, Lehigh University
ABSTRACT. This paper investigates audit opinion shopping of U.S. firms. Opinion shopping suggests that firms dismiss their auditors because of the receipt of modified audit opinion in one year and then switch auditors in the next year to avoid the receipt of the same opinion. Hence, opinion shopping is assumed to exist if there is a positive association between dismissal of auditors and improvement in audit opinion after the dismissal. In a sample of firms that receive going concern modification or clean opinion, we use an auditor change model to control for factors that affect change and an audit opinion model to control for factors that affect the issuance of going concern opinion. We find that improvement in audit opinion is positively related to dismissal of auditors in both models, thus suggesting that firms in U.S. engage in opinion shopping. These results have implication for regulators and policy makes that are concerned about auditor independence.
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