Management Turnover Following Auditor Resignations

We investigate chief executive officer (CEO) and chief financial officer (CFO) changes in firms that experience an auditor resignation. We argue that boards of directors have incentives to replace these managers following an auditor resignation both to improve financial reporting performance and to...

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Bibliographic Details
Published in:Contemporary accounting research 2008-07, Vol.25 (2), p.8
Main Authors: Menon, Krishnagopal, Williams, David D
Format: Article
Language:English
Subjects:
Auditors
Chief executive officers
Chief financial officers
Employee turnover
Financial reporting
Resignations
Studies
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Summary:We investigate chief executive officer (CEO) and chief financial officer (CFO) changes in firms that experience an auditor resignation. We argue that boards of directors have incentives to replace these managers following an auditor resignation both to improve financial reporting performance and to restore reporting credibility. We use two control samples, one matched on industry and size and the other comprising firms that experienced client-initiated auditor changes. We observe higher turnover in both CEO and CFO positions following auditor resignations than in either of the two control samples. The incidence of CEO and CFO turnover increases for firms filing auditor resignation-related reportable events. [PUBLICATION ABSTRACT]
ISSN:0823-9150
1911-3846