Auditor switches and firm ownership structure

Abstract

This paper investigates whether the likelihood of auditor switches in family firms is significantly different from that in non-family firms. It also examines whether, in case of an auditor switch, family firms are more-less likely to perform cross-lateral switches. Relying on a sample of auditor switches in the U.S. over seven calendar years, 2004-2010, we document the following. First, the likelihood of auditor switches in family firms is significantly lower than that in non-family firms. Second, we didn’t find a significant difference in type of switch (cross-lateral) performed by family and non-family firms. Our additional analysis shows that the likelihood of auditor resignations in family firms is significantly lower than that in non-family firms. Finally, family firms are less likely to dismiss their auditors compared to non-family firms.