Auditors’ communication with the audit committee and audit opinion shopping

Abstract

This study investigates whether and how external auditors’ communication with the audit committee (AC) influences opportunistic auditor changes by corporations. We adopt the framework developed by Lennox (2000) to measure the likelihood of firms engaging in opinion shopping. Using data from Korean listed firms that established an AC from 2018 to 2020, we find that greater communication between auditors and the AC is associated with a decrease in opinion shopping behavior. This effect is more pronounced when AC members are independent, when the AC chair has accounting financial expertise, and when communication between auditors and the AC addresses internal control deficiencies. Overall, our study sheds light on the effectiveness of auditors’ communication with the AC in deterring opportunistic auditor choices, offering valuable insights for policymakers and regulators.