Opinion Shopping to Avoid a Going Concern Audit Opinion and Subsequent Audit Quality

What is it about?

Regulators have a great concern on the possiblie auditor swich by client firms for the audit opinion shopping purpose. However, there has been only limited research on the issue. Using Lennox's (2000) framework to identify the auditor switch for the opinion shopping purpose, we find that audit quality, measured by the type II error rate in the audit opinion and the frequency of restatement by client firms, is lower after the auditor switch for opinion shpping purpose. However, when clients retain incumbent auditors for the opinion shopping purpose, we do not find any evidence of deteriorated audit quality.

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