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The Flip Side of Strict Regulations: International Evidence on Audit Opinion Shopping

Seminar

seminar2
  • Date

    02 Feb 2024

  • Organiser

    School of Accounting and Finance

  • Time

    10:30 - 12:00

  • Venue

    M714 Map  

Speaker

Prof. CHOI JONG HAG

Summary

ABSTRACT

This study examines how a country’s accounting and audit regulatory environments influence an audit client’s tendency to avoid receiving a modified audit opinion through opinion shopping. Using Lennox’s (2000) framework and extensive data from 31 countries, we find that audit clients are more likely to engage in opinion shopping under strong regulatory regimes than under weak regimes. Further analyses indicate that the signaling effect of audit opinions and Big 4 auditors’ opinion conservatism contribute to a more prevalent opinion shopping under strong regulatory regimes. Moreover, a higher propensity for opinion shopping under strong regulatory regimes occurs mostly among clients seeking downward auditor switches to non-Big 4 auditors. The finding that strong regulations are associated with a higher rather than lower opinion-shopping tendency provides a new perspective on the unintended adverse consequences of strict regulations on auditing practices.

Keynote Speaker

Prof. CHOI JONG HAG

Professor in Accounting
College of Business Administration
Seoul National University

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