Change of Auditors and Clients Stock Price - Dissertation Example

Download file to see previous pages This research has taken into concern an understanding of the role of auditors in business organizations and how businesses are dependent on the reports of the auditors. A secondary study has been done to determine the relationship between the change in auditors by business organizations and the prices of stock. For this research, a thorough literature review has been done to obtain an understanding of the different views and opinions of early and contemporary researchers on the role of auditors, the relationship between change in auditors and stock prices of client companies, and the positive and negative impacts of share prices on change in auditors. Both qualitative and quantitative data have been collected and analyzed to determine the reasons for the change in auditors.

Stock prices of client companies and the characteristics of the firms significantly determine the relationship of the companies with their auditor firms. Different business organizations having different characteristics and processes in their businesses result in varying demands for the quality of audits. This is particularly in association with external auditors that perform an audit over the companies. Some of the common determinants of business firms for choosing the quality of auditors include their membership in the finance sector, leverage, size, profitability, and market-to-book ratio. Thus the choice of auditors by an organization is related to the above-mentioned factors (Aksu, Onder, and Saatcioglu 2007).

The role of auditors takes place in a business environment that is highly regulated. Both the audit firms and the individual auditors have certain independent requirements along with ethical fulfillment that they need to encounter and follow (Great Britain 2011). Quality auditing is what is expected by every business organization and hence the choice and selection of quality audits are considered essential for business firms. Specific skills are essential for quality audit works to be performed by auditors. This includes the personal talents of the auditors, dedicated training, and a wide range of experiences. It is often considered similar to police work and based on the audit, a company’s performance in terms of financial dealings and achievements are clearly stated and understood which helps the organization both internally and externally to act on their business processes (Ashford 2002).

Several types of research have been conducted on trying to determine an understanding of the association between the selections of auditors and the stock prices of clients. ...Download file to see next pages Read More