We asked switchers if they feel better about their

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We asked switchers if they feel better about their current auditor than their previous one on a number of factors. Next, to provide some perspective to the data, we compared the current perceptions of switchers to companies that didn’t hire new auditors after the passage of SOX. Then we determined whether companies that switched auditors post- SOX were able to elude costly internal control expenditures. We focused on internal control costs because even private companies began expanding these activities post-SOX. On many factors (for instance, mutual cooperation and satisfaction with service), switchers are more pleased with their new auditor than they were with their former one, as shown in Table 4. Regardless of who initiated the switch, it seems that companies are currently better off overall since they changed auditors. But are switchers as happy as companies that have engaged the same auditor for the entire post-SOX era (the nonswitchers)? Our evi- dence suggests that they are. Nevertheless, while switchers are as happy as nonswitchers, they also appear to be expe- riencing the same internal control costs as a percentage of revenue. In short, despite whatever expectations they may have had, these companies didn’t save any money by switching auditors. Where Does Your Company Fit In? In this article, we’ve briefly summarized research related to auditor switches and have attempted to shed new light on the topic through a recent survey of IMA members. We specifically sought to examine voluntary, post- SOX/Andersen switches and to obtain perceptions about these decisions from the company’s perspective. Our survey results provide a number of interesting findings: First, we found that companies that switched firms tended to be younger, smaller, and more likely to be a busy-season audit than nonswitchers. Moreover, many of the switches in our sample were a move from a Big 4 firm to a non-Big 4 firm. Second, the two primary rea- sons for post-SOX switches were a lack of client service from the auditor and high audit fees. Third, even though they might not have reduced their costs, companies that switched auditors seem to be more pleased with their new firm, and their current satisfaction levels are equivalent to those of nonswitchers. SF The authors want to thank IMA for providing a grant that helped to fund their research. Joseph F. Brazel, Ph.D., is an associate professor of account- ing at North Carolina State University’s College of Manage- ment in Raleigh, N.C. You can reach Joe at (919) 513-1772 or [email protected] . Marianne Bradford, Ph.D., CPA, is an associate professor of accounting at North Carolina State University and is a member of IMA’s North Carolina Triangle Area Chapter. You can reach Marianne at (919) 513-1436 or [email protected] . January 2011 I STRATEGIC FINANCE 5 3
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