An Investigation of Asymmetrical Power Relationships Existing in Auditor-Client Relationship During Auditor Changes

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In recent years, considerable interest has been stimulated concerning potential conflicts of interest between a company's management and their independent auditors. Many researchers examined the association between corporations who changed their present auditors, and factors such as auditor's opinion on the financial statements, management changes, mergers, financial distress, etc. Some of these research efforts resulted in findings that were inconsistent with each other. The current research was therefore undertaken with the objective of developing a theoretical model of auditor change process and to explain the justification for considering certain specific factors that may be present in an auditor-client relationship. The ... continued below

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[vii], 165 leaves: ill.

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Sriram, Srinivasan August 1987.

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  • Sriram, Srinivasan

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In recent years, considerable interest has been stimulated concerning potential conflicts of interest between a company's management and their independent auditors. Many researchers examined the association between corporations who changed their present auditors, and factors such as auditor's opinion on the financial statements, management changes, mergers, financial distress, etc. Some of these research efforts resulted in findings that were inconsistent with each other. The current research was therefore undertaken with the objective of developing a theoretical model of auditor change process and to explain the justification for considering certain specific factors that may be present in an auditor-client relationship.
The research design and the methodology for analyses were developed on the basis of the theory on power conflicts found in political science literature and by the use of Wrong's power model on authority relationship. Sources of power such as the size of an audit firm, size of a corporation, the stock exchange membership, the ability of an auditor to qualify the opinion on the financial statements, the ability of the management of a corporation to terminate the audit contract following the issue of a qualified opinion, and change of a corporation's CEO were identified and converted into independent variables.
Data were collected from secondary sources on a sample of 200 corporations, 100 companies that had changed their audit firm at least once during the period 1983-85, and 100 corporations that did not change their audit firm during this period. The resulting data were analyzed using the MDS-ALSCAL procedure and logit regression with maximum likelihood estimators.
The findings of this research support the power model and its relevancy to the study of auditor-client relationship. The variables, client size, stock exchange membership, and audit firm size were found to have a significant association with corporations who changed their audit firms. However, the variable, change of CEO, was not found to be a significant cause of audit firm changes.

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[vii], 165 leaves: ill.

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  • August 1987

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  • Aug. 22, 2014, 6 p.m.

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  • March 23, 2016, 12:42 p.m.

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Sriram, Srinivasan. An Investigation of Asymmetrical Power Relationships Existing in Auditor-Client Relationship During Auditor Changes, dissertation, August 1987; Denton, Texas. (digital.library.unt.edu/ark:/67531/metadc331678/: accessed September 22, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; .