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The Impact of Social Learning and Social Norms on Auditor Choice

The purpose of this dissertation is to explore the influences of industry dynamic factors (e.g., peer selections) on a client’s subsequent decision to select the type of auditor (e.g., Big N versus non-Big N), following auditor turnover. More specifically, drawing on social norms and social learning theories, I develop testable implications and investigate whether and how industry dynamics have an incremental power in explaining auditor choice beyond traditional firm-specific variables documented in prior research. Using a large sample from years 1988 – 2012, I find that clients are more likely to imitate their industry peers’ prior selections to select the type of their succeeding auditors, consistent with the implications of social learning theory. I also find that clients in industries with stronger industry norms, as measured by a greater proportion of clients audited by Big N auditors in an industry, are more likely to select Big N auditors as their succeeding auditors, consistent with the implications of social norms theory. To my best knowledge, this is the first study to explore the impact of social dynamics measured at the industry level on auditor selection and provide large-sample evidence on the relations between industry dynamics and auditor selection at the firm level. Findings of this study provide insights into the dynamic process of auditor selection in which companies do not make auditor-selection decisions in isolation of one another as often posited in existing literature, contribute to the research on the determinants of auditor choice by incorporating industry dynamics into an agent-principal model, and provide a more comprehensive view of the phenomenon of auditor selection.

Identiferoai:union.ndltd.org:unt.edu/info:ark/67531/metadc700085
Date08 1900
CreatorsLi, Xudong
ContributorsSun, Lili, Curtis, Mary B., Iyer, Govind S., Pavur, Robert J.
PublisherUniversity of North Texas
Source SetsUniversity of North Texas
LanguageEnglish
Detected LanguageEnglish
TypeThesis or Dissertation
Formatvi, 95 pages : color illustrations, Text
RightsPublic, Li, Xudong, Copyright, Copyright is held by the author, unless otherwise noted. All rights reserved.

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