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Auditor Reputation and Model of Governance: A Comparison of France, Germany and Canada

Auditor Reputation and Model of Governance: A Comparison of France, Germany and Canada This paper investigates the determinants of auditor reputation for listed companies in France, Germany and Canada. These countries differ in their financing systems, corporate governance culture and auditing regulations, and thus provide interesting backgrounds to an investigation of auditor role in corporate governance by testing both theories of the demand for auditor reputation, i.e., the agency and insurance (deep pockets) theories. Logistic analyses document that the probability to appoint one of the Greater International Networks (GIN) depends on national environments. The insurance hypothesis dominates in Canada. In France, this probability increases with the intensity of shareholder–debtholder conflicts in highly opportunistic situations. None of these theories finds any support in Germany, consistent with the characteristics of this environment: an insiders dominant and bank‐oriented financing system, with an auditor role primarily devoted to the supervisory board, and a very low litigation risk for auditors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Auditing Wiley

Auditor Reputation and Model of Governance: A Comparison of France, Germany and Canada

International Journal of Auditing , Volume 9 (1) – Mar 1, 2005

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Publisher
Wiley
Copyright
Copyright © 2005 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1090-6738
eISSN
1099-1123
DOI
10.1111/j.1099-1123.2005.00100.x
Publisher site
See Article on Publisher Site

Abstract

This paper investigates the determinants of auditor reputation for listed companies in France, Germany and Canada. These countries differ in their financing systems, corporate governance culture and auditing regulations, and thus provide interesting backgrounds to an investigation of auditor role in corporate governance by testing both theories of the demand for auditor reputation, i.e., the agency and insurance (deep pockets) theories. Logistic analyses document that the probability to appoint one of the Greater International Networks (GIN) depends on national environments. The insurance hypothesis dominates in Canada. In France, this probability increases with the intensity of shareholder–debtholder conflicts in highly opportunistic situations. None of these theories finds any support in Germany, consistent with the characteristics of this environment: an insiders dominant and bank‐oriented financing system, with an auditor role primarily devoted to the supervisory board, and a very low litigation risk for auditors.

Journal

International Journal of AuditingWiley

Published: Mar 1, 2005

References