Evidence of Opinion Shopping : An Analysis of Lateral Auditor Switches

This paper provides evidence to show that opinion shopping motivates auditor change within the Big 5 category (lateral auditor switches), after controlling for auditee complexity, auditee's sales growth and audit fee change. By focussing on lateral switches, this study provides a more robust test for opinion shopping. According to agency theory, switches across high quality Big 5 to non-Big 5 auditors (or vice-versa) are motivated by differences in agency costs. As there is no change in audit quality for lateral switches, agency cost factors are less likely to be motivating the switches. Our results are robust to alternative proxies for opinion shopping, timing and merger effect of audit firm and more importantly, the inclusion of agency cost variables.Key Words: Auditor switching; Opinion shopping