[This study examines the motivations for failing firms to change auditors. Some of the factors that could influence auditor switching include audit qualifications, reporting disputes, management changes, audit fees, and insurance needs. Annual reports, 10-Ks, and proxy statements were used to gather data for a sample of 132 failing (bankrupt) firms and a matched-pair sample of nonfailing firms. The investigation's findings strongly supported our prior expectations that failing firms have a greater tendency to switch auditors than do healthier firms. Other findings revealed that neither audit qualifications nor management changes were statistically associated with auditor displacement in failing firms. Failing firms that changed auditors did display a preference to move to a different class of CPA firms. Also, size did not appear to matter with respect to the observed auditor switching among the failing firms, although it appeared to have some effect among control firms. Overall, our study's major findings suggest a definite need to control for the presence of financial distress in studies on auditor switching.]

[This paper identifies widespread noncompliance with SEC regulations requiring prompt disclosure of auditor changes and investigates whether late filers and their auditors simply lack SEC expertise or have other reasons to delay reporting the auditor change. Some direct evidence in support of a specific Big 6 "quality" differential is provided. Most notably, the time to file the Form 8-K and the frequency of late filings increase significantly when non-Big 6 auditors are involved. Additionally, shorter filing delays and gradually higher compliance rates are detected after 1989 when the SEC reduced the Form 8-K filing time and the AICPA instituted a requirement for auditors to notify the Commission independently when a change occurs. We also find that late filers are more likely to be smaller and financially distressed, and less likely to issue securities following the auditor change, suggesting that compliance is affected by factors other than competency.]

To investigate CEOs' incentives to liquidate their firms, we examine the effects of insider ownership and compensation in stock options on 30 voluntary liquidation decisions by industrial firms in the period 1975–1986. We find that liquidation decisions are influenced by CEO incentive plans and increase shareholder value. Firms with more outside board members, smaller market-to-book ratios, and attempts by outsiders to gain control are more likely to be liquidated. Although few top executives of liquidating firms subsequently take comparable jobs, at least 41% of CEOs who downsize are made better off by liquidation.

This study presents a logistic regression model which is used to identify U.S. companies that are likely to have their financial statements qualified for going concern reasons. The model is developed using financial statement data for a sample of failing companies. Validation tests performed on independent samples of bankrupt and nonbankrupt companies indicate that the model has reasonable explanatory power. The findings from this study indicate that the auditor's qualification for companies in financial distress is correlated with variables derived from financial statement data. The variables that are consistently identified as being closely associated with the auditor's decision whether to qualify his opinion are recurring operating losses and change in a company's liquidity position. Résumé. Cette étude présente un modèle de régression logistique utilisé afin d'identifier les sociétés américaines dont les états financiers sont susceptibles d'être accompagnés d'une opinion avec restriction quant à la permanence de l'entreprise. Le modèle est construit à l'aide de données tirées d'états financiers provenant d'un échantillon d'entreprises en difficultés. Des tests de validation effectués sur des échantillons indépendants de société faillies et non‐faillies, indiquent que le modèle démontre une capacité explicative acceptable. Les résultats de cette étude montrent une corrélation entre, d'une part, l'opinion avec restriction dans le cas de sociétés en difficultés financières et entre, d'autre part, des variables tirées des données d'états financiers. Les variables qui sont régulièrement identifiées comme étant reliées de près à la décision du vérificateur d'émettre un rapport avec restriction, sont les pertes d'exploitation répétitives et la variation dans la position de trésorerie d'une société.

This paper examines audit report lags and earnings announcement lags for a sample of firms that switched auditors. We investigate whether audit report and earnings announcement lags are associated with the timing of auditor changes in relation to firms' fiscal year‐ends. It is hypothesized that firms which replace their auditor early (late) in the fiscal year do so for positive (negative) reasons and experience shorter (longer) reporting lags. Conflicts over reporting issues can be difficult to resolve and consequently lead to reporting delays. In other cases, clients may be more concerned about adhering to customary reporting practices or improving reporting timeliness. These are likely to be considerations in auditor realignment decisions and are predictably reflected in the timing of the auditor change. Résumé. Les auteurs s'intéressent aux décalages dans la production des rapports des vérificateurs et dans la publication des bénéfices, pour un échantillon d'entreprises ayant changé de vérificateurs. Ils se demandent si ces décalages sont reliés au choix du moment du changement de vérificateurs par rapport à la date de clôture de l'exercice. Selon leur hypothèse, les entreprises qui remplacent leurs vérificateurs tôt (tard) dans l'exercice le font pour des raisons positives (négatives), et les décalages enregistrés dans la production de l'information sont plus courts (plus longs). Les conflits touchant les questions relatives à l'information à fournir peuvent être difficiles à résoudre et, en conséquence, conduire à des retards dans la publication de l'information. Dans d'autres cas, les entreprises clientes peuvent être davantage préoccupées par le respect des méthodes coutumières de présentation de l'information ou par l'accélération de la publication de l'information. Ces facteurs sont susceptibles d'entrer en ligne de compte dans les décisions de réorientation des vérificateurs, et il est à prévoir qu'ils se refléteront dans le choix du moment du changement de vérificateurs.

This study examines the motivations for failing firms to change auditors. Some of the factors that could influence auditor switching include audit qualifications, reporting disputes, management changes, audit fees, and insurance needs. Annual reports, 10-Ks, and proxy statements were used to gather data for a sample of 132 failing (bankrupt) firms and a matched-pair sample of nonfailing firms. The investigation's findings strongly supported our prior expectations that failing firms have a greater tendency to switch auditors than do healthier firms. Other findings revealed that neither audit qualifications nor management changes were statistically associated with auditor displacement in failing firms. Failing firms that changed auditors did display a preference to move to a different class of CPA firms. Also, size did not appear to matter with respect to the observed auditor switching among the failing firms, although it appeared to have some effect among control firms. Overall, our study's major findings suggest a definite need to control for the presence of financial distress in studies on auditor switching.

Identifies widespread noncompliance with Securities and Exchange Commission (SEC) regulations requiring prompt disclosure of auditor changes. Institutional setting; Effect of changes in regulatory regimes; Competency factors; Disclosure costs and incentives.