Why companies replace their external auditors

Changing audit firms is a massive undertaking that requires careful consideration—but learning from the experiences of other audit committees that have gone through the process can simplify what’s often a difficult decision.

An analysis of public company regulatory filings shows the factors behind why companies change external auditors and the circumstances under which proxy advisory firms are more likely to demand it.

Not surprisingly, a hike in audit fees is among the more mundane reasons for why companies decide to change audit firms. D.R. Horton and McDermott International are recent examples of companies whose audit committees decided to change audit firms following “a competitive request for proposal process,” according to their respective regulatory filings. PwC, which has served as D.R. Horton’s auditor since 2008, and Deloitte, which has been McDermott’s auditor since 2006, were each replaced by EY.