Abstract
We examine the client’s decision to engage a nonlocal auditor when close quality options are available. Clients seek nonlocal specialist auditors more often, but nonlocal engagements do not appear motivated by better pricing in distant markets. We show that, controlling for client-auditor distance, choosing a nonlocal auditor is associated with more restatements and litigation, suggesting that clients engage nonlocal auditors to avoid oversight. The effect of this choice on audit quality and client litigation hold in the context of a natural experiment where the cost of monitoring the client is decreased exogenously. Nonlocal engagements are ultimately detrimental to shareholder wealth.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
