This paper studies the factors that affect a firm's choice to dismiss or remain with their incumbent auditors when faced with adverse auditor opinions on the design and effectiveness of their internal controls. The study focuses on a unique sample of firms that received an adverse opinion in one...

Recent changes in the regulatory environment require that auditors express an opinion on the design and effectiveness of their clients' internal controls. This shift likely impacted auditor-client relationships negatively, especially for firms that receive an adverse internal controls opinion....