Academic Spotlight: Auditor Ratification’s Impact on Audit Quality

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Derryck Coleman, Audit Analytics

In June 2020, Paul Tanyi, Gregory Martin, Dasaratha Rama and K. Raghunandan published research in Accounting Horizons that measured shareholder votes against the ratification of an audit firm in the proxy statement. Specifically, the article found that companies with greater shareholder dissatisfaction saw an increase of $137 thousand, in audit fees, compared to an average increase of $83 thousand for companies with less shareholder dissatisfaction. The dissatisfaction also resulted in longer reporting lags, lower abnormal accruals and fewer accounting misstatements.

Here, Audit Analytics examines a frequency distribution analysis of percentage votes against auditor ratification.

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