The Impact of Corporate Governance Mechanisms on Audit Quality : Evidence from Tunisia

The purpose of this paper is to analyze the impact of corporate governance mechanisms (i.e., ownership structure, size, debt and the composition of the board of directors) on the external demand for a higher quality or reputed auditor. The latter, which is estimated by the Principal Component Analysis (PCA) procedure, is based on the size of the audit firm, firm's reputation, its experience in auditing, industry specialization, and the extent to which Information and Communication Technologies (ICT) are used. Using a sample of 137 firm-year observations for the period 2005-2009, the results show that board size, CEO-chairman duality, and the presence of majority shareholders positively affect the demand for higher quality auditor. In contrast, the presence of institutional investors and the customer firm size negatively impact the demand for better quality auditor. Further, the existence of independent members on the board of directors, the ownership of the CEO and the level of indebtedness of the audited firm have no effect on the choice of a reputed auditor