Choice criteria of listed Australian public companies for selecting an auditor: an exploratory study

Sands, John, and McPhail, Janelle (2003) Choice criteria of listed Australian public companies for selecting an auditor: an exploratory study. International Journal of Business Studies, 11 (1). pp. 109-133.

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Abstract

The purpose of this research is to determine the choice criteria companies use in the auditor selection process for listed Australian public companies. This is the first Australian study to investigate this issue. The study drawn on international literature and attempts to develop a more comprehensive study of these characteristics that minimise the limitations identified in these overseas studies. Eight constructs were identified from the literature and then empirically tested in a national survey. Factor analysis was used to analyse the data resulting in the establishment of nine choice criteria. The two most important choice criteria identified are Technical Competence and Client Orientation. Literature suggests that companies incur direct and indirect costs associated within an auditor change and such costs may impact on the importance of selection decision choice criteria. A comparison between companies that selected a new auditor and those that re-appointed the incumbent audit firm, suggests that seven of these choice criteria are of equal importance for the selection and re-appointment decisions. However, the results suggest that the other two criteria (Level of Audit Fee, and Effective Preparation and Communication of Audit Submission) are significantly more important to companies appointing a new auditor. The perceived difference in importance of these criteria on the selection decision process identified has implications for audit firms attempting to retain or obtain an audit appointment. These findings also should interest corporate and academic accountants.

Item ID: 8931
Item Type: Article (Refereed Research - C1)
Keywords: choice criteria; auditor selection; listed companies; technical competence; client presentation
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ISSN: 1320-7156
Date Deposited: 12 Mar 2010 00:47
FoR Codes: 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1503 Business and Management > 150399 Business and Management not elsewhere classified @ 100%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9104 Management and Productivity > 910403 Marketing @ 100%
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