The purpose of this dissertation is to examine the informational role of audit client (i.e. firm) reputation in the auditor switching and retention decision. I perform an experimental examination of an analytical model, prescribing the optimal choices made by firms in the decision to retain or switch auditors without considering firm reputation. Using an experimental markets approach, I provide evidence of the market reaction to a firm's switch/retention decision under two alternative treatments. In the first (baseline) treatment, an explicit test of the analytical model, firms do not incur reputation effects when making the decision to switch or retain auditors. In the second treatment, firms consider market perceptions of opportunistic auditor switching and retention and the potential effects on the firm's reputation.The choice of auditor switching and retention is a significant component of the firm's corporate governance structure. I precisely measures reputation formation and its impact on this specific governance decision by the inclusion of prior period auditor switch/retention decisions made by firms in reputation treatment conditions. Prior archival research has demonstrated a link between auditor quality and earnings quality. These studies suggest that the retention of a high-quality auditor, or dismissal of a poor-quality auditor, can signal high quality earnings to the market. The converse is also suggested; retention of a poor-quality auditor, or dismissal of a high-quality auditor, can signal poor earnings quality. The decision to retain or switch auditors is made annually by firms who have superior information over their auditors and investors. In the short run, the decision to retain or switch auditors offers a temporary signal which the market may not clearly price. However, including the firm's track record of auditor switching and retention decisions among auditors of differing quality allows for the development of a positive or negative reputation on this portion of corporate governance.The results presented provide evidence of the model's descriptive validity for the firm's optimal choices and related market reaction to the auditor switching decision for a finite time horizon. Additionally, the study examines the market reaction to a firm's reputation on the auditor switching and retention decision.

The purpose of this thesis was to analyze a number of auditor change and other peripheral issues from two related perspectives. Empirical data were gathered from publicly available Forms 8-K and 10-K to first assess whether meaningful differences existed between NYSE, AMEX, and OTC registrants regarding disclosures required in those documents. Secondly, the data were analyzed to determine whether differences existed with respect to the accounting firms (Big Eight or non-Big Eight) involved in the auditor changes. In most of the tests designed to achieve these purposes, statistically defensible results were obtained using the nonparametric chi-square test for significance of observed differences and the McNemar test for significance of changes, at the .05 level.