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Is Corporate Governance A Determinant of Auditor Choice?-Evidence From Turkey

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  • Yasemin KARAIBRAHIMOGLU

    (Izmir University of Economics, Faculty of EconomicsandAdministrativeSciences, Department of Business Administration)

Abstract

External independent audit is an important component of strong corporate governance. The choice of independent external auditor is determined by several different factors. Besides all firm-specific factors, corporate governance might be a determinant of external auditor choice. The relation between auditor choice and corporate governance varies in accordance with the “substitution or complementary effect”. Firms may prefer to demand less effective and low quality audit and substitute the quality of audit services by a strong corporate governance structure. Alternatively, firms may demand a high quality audit in order to complement and support firms’ corporate governance structure. Therefore it is important to understand how a strong corporate governance structure is associated with auditor choice to reveal the effect of each corporate governance mechanisms on Big-4 and industry-specialist auditor choice. The main aim of this study is to investigate the association between corporate governance and auditor choice by using a sample of 805 firm-year observations from Istanbul Stock Exchange (ISE) between the years 2005-2009. Overall findings show that, firms’ auditor choice in terms of Big-4 and audit firm industry specialization is affected by the firm-level corporate governance mechanisms of firms, particularly, board of directors’ composition and ownership structure.

Suggested Citation

  • Yasemin KARAIBRAHIMOGLU, 2013. "Is Corporate Governance A Determinant of Auditor Choice?-Evidence From Turkey," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 13(2), pages 273-284.
    • Handle: RePEc:ege:journl:v:13:y:2013:i:2:p:273-284
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    References listed on IDEAS

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    4. Siregar, Sylvia Veronica & Utama, Sidharta, 2008. "Type of earnings management and the effect of ownership structure, firm size, and corporate-governance practices: Evidence from Indonesia," The International Journal of Accounting, Elsevier, vol. 43(1), pages 1-27, March.
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    Cited by:

    1. Aree Saeed MUSTAFA & Luqman Muhammed SAEED & Nishtiman Hashim MOHAMMED, 2018. "Auditor Selection in Borsa Istanbul," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 16(152), pages 599-599.
    2. Ben-Hassoun, Amira & Aloui, Chaker & Ben-Nasr, Hamdi, 2018. "Demand for audit quality in newly privatized firms in MENA region: Role of internal corporate governance mechanisms audit," Research in International Business and Finance, Elsevier, vol. 45(C), pages 334-348.
    3. Qasim Ahmad Alawaqleh & Nashat Ali Almasria, 2021. "The Impact of Audit Committee Performance and Composition on Financial Reporting Quality in Jordan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(3), pages 55-69, May.
    4. Mohamed M. El-Dyasty & Ahmed A. Elamer, 2021. "The effect of ownership structure and board characteristics on auditor choice: evidence from Egypt," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 18(4), pages 362-377, December.

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    More about this item

    Keywords

    Auditor choice; corporate governance; Turkey;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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