Corporate ethics and auditor choice - international evidence

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

Research output: Contribution to journalArticleResearchpeer-review

5 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)57-65
Number of pages9
JournalResearch in Accounting Regulation
Volume27
Issue number1
DOIs
Publication statusPublished - 1 Apr 2015

Fingerprint

moral philosophy
firm
evidence
hiring
Corporate ethics
Auditor choice
Values
Corporate ethical values
Auditors

Cite this

Houqe, Muhammad Nurul ; van Zijl, Tony ; Dunstan, Keitha ; Karim, A. K M Waresul. / Corporate ethics and auditor choice - international evidence. In: Research in Accounting Regulation. 2015 ; Vol. 27, No. 1. pp. 57-65.
@article{fb753184b43c4e9b86d9be06dbd73459,
title = "Corporate ethics and auditor choice - international evidence",
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.",
author = "Houqe, {Muhammad Nurul} and {van Zijl}, Tony and Keitha Dunstan and Karim, {A. K M Waresul}",
year = "2015",
month = "4",
day = "1",
doi = "10.1016/j.racreg.2015.03.007",
language = "English",
volume = "27",
pages = "57--65",
journal = "Research in Accounting Regulation",
issn = "1052-0457",
publisher = "Elsevier BV",
number = "1",

}

Corporate ethics and auditor choice - international evidence. / Houqe, Muhammad Nurul; van Zijl, Tony; Dunstan, Keitha; Karim, A. K M Waresul.

In: Research in Accounting Regulation, Vol. 27, No. 1, 01.04.2015, p. 57-65.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Corporate ethics and auditor choice - international evidence

AU - Houqe, Muhammad Nurul

AU - van Zijl, Tony

AU - Dunstan, Keitha

AU - Karim, A. K M Waresul

PY - 2015/4/1

Y1 - 2015/4/1

N2 - 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.

AB - 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.

UR - http://www.scopus.com/inward/record.url?scp=84928420637&partnerID=8YFLogxK

U2 - 10.1016/j.racreg.2015.03.007

DO - 10.1016/j.racreg.2015.03.007

M3 - Article

VL - 27

SP - 57

EP - 65

JO - Research in Accounting Regulation

JF - Research in Accounting Regulation

SN - 1052-0457

IS - 1

ER -