Corporate Ethics and Auditor Choice – International Evidence

This study examines the effect of board ethics and board size on firms' choice of external auditor. Using a large sample of 132,853 firm year observations from forty-six countries around the globe, we find that the level of board ethics in the firm's country of domicile has a positive impact on the likelihood of choice of a Big 4 audit firm. However, we also find that increasing level of board ethics moderates the impact of board size on the likelihood of choice a Big 4 audit firm. These results establish, through the firm's choice of auditor, an indirect link between the level of board ethics in the firm's country of domicile and financial reporting quality