Abstract
This study investigates how the change of top management(CEO) affects the auditor choice and audit quality, and whether the corporate governance of the audited company makes a difference in these aspects. Despite the fact that a change of CEO who can exert influence on the auditor appointment process likely has a significant impact on auditor choice, studies on the specific aspects of the impact have been rare. The findings of this study are as follows. First, CEO turnover has positive association with auditor switch in the subsequent year. Second, when CEO turnover occurs, the incumbent auditor who puts in more audit efforts is more likely to be fired. Further, a new auditor’s efforts tend to decrease when the auditor is appointed immediately after the CEO turnover. This can be collectively interpreted as the incoming CEOs prefer low-quality audits on average. Third, the client company’s corporate governance appears not to suppress the incoming CEO’s preference for low-quality audits, suggesting that Korean companies
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