The Impact of Contamination on Auditor Reputation - Investigating Changes in Market Share After Restatement

Abstract

This study investigates whether the reputation of the audit firm has been affected following restatement announcements(contamination) resulting in a decline in the industry market share of the audit firm This study also examines whether non-restating clients avoid contaminated firms indicating that the possibility of auditor’s turnover increases with contamination for non-restating clients The empirical results show that audit firms experience a loss in industry market share following client restatements and find that the likelihood of auditor turnover increases with contamination even for non-restating clients In the additional analyses we find that there is no difference in the effects of contamination between Big4 and non-Big4 auditors Overall the evidence suggests that auditors have an incentive to maintain their reputation and provide high-quality audit service to avoid the penalties caused by audit failure

Date of Award	2019
Original language	English
Supervisor	Yu-Ting Hsieh (Supervisor)