Model of Information Dissemination in the Context of Reputation Formation of an Auditing Company: Official Sources or “Word of Mouth”?

Abstract

The reputation of auditing firms is of paramount importance in ensuring trust and confidence in financial markets. This article investigates the information dissemination model and its impact on the reputation formation of auditing companies, focusing on the choice between official sources (formal channels, corporate communications, regulatory disclosures, etc.) and word-of-mouth mechanisms (informal channels, client recommendations, corporate gossip, etc.). The research reveals the complex dynamics between formal and informal information dissemination strategies (official sources provide trust and transparency, while word-of-mouth mechanisms offer detailed information and trust) and their implications for reputation management in the auditing industry. The relevance of this research problem lies in the critical role of auditing firms in supporting transparency and honesty in financial reporting, especially after corporate scandals and regulatory scrutiny. The primary aim of this research is to understand the relative effectiveness of different information dissemination models in shaping the reputation of auditing companies. The choice of research subject is justified by the significant influence of auditing firms on financial markets, corporate governance, and investor trust. Using VOSviewer 1.6.16 software, the article conducts a bibliometric analysis of English-language articles and conference abstracts indexed in the Scopus database from 2007 to 2023 (1177 publications) using the keywords “Reputation” and “Auditing Firm.” The analysis confirms the increasing scholarly interest in this topic and identifies 8 thematic clusters, the largest of which combines corporate, image, and social reputation with stability and consistency. The empirical part of the research involves constructing a polygamous model similar to the SIR model, which describes the behavior of three groups of subjects depending on the presence of information and actions regarding its dissemination (active, passive, neutral). The article models the intensity of changes in the number of group members considering various phenomenological parameters (e.g., intensity of communicative processes between groups, structure of social system connections, mathematical expectation of time required for a subject to transition from one group to another, etc.). The results of this research have practical implications for auditing firms, regulatory bodies, and stakeholders in the financial sector. By understanding the relative strengths and weaknesses of different information dissemination models, auditing firms can adapt their communication strategies to effectively enhance their reputation. This research contributes to the ongoing discourse on reputation management and trust-building in financial markets.