Abstract
AbstractThe purpose of this study is providing a framework for understanding the role of audit firm rotation in client expected value. And to explain the principles of client choice by auditor via specified models. We formalize this idea through stakeholder theory. Results show that the owners’ expected outcome is increase in the level of reporting quality, all else held equal. Also client selection is a decrease in function with regard to the factors affecting it. Like the number of sub-branches, probability of good selection, probability of good perceived in a branch point, stages ahead and taking account of investigative intuition. We propose that retain-rotation audit firm vs. good or bad selection client relationship developed based on bid and ask process. Drawing on our analytical framework, we provide directions for further opportunities for research of client and audit firm.
Highlights
Over the past few years, the audit market has been subject to intense policy debates around the world, focusing in particular on the issue of concentration, choice, and liability
We show that relationship between audit firm and client has developed based on bid and ask process
We investigate the mutual relationship between audit firm and client in a mathematical model
Summary
Over the past few years, the audit market has been subject to intense policy debates around the world, focusing in particular on the issue of concentration, choice, and liability. It considered the relationship between audit firm and the owner Abbas Ali Daryaei received BS degree in Accounting from college of economic science Tehran, Iran in 2006. He received MS degree in accounting from University of Mazandaran, Babolsar, Iran.
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