Despite Sarbanes-Oxley and other regulatory efforts to make auditors more independent and more skeptical, companies have still been able to shop for favorable external audit opinions, according to a new academic study.
In research published by a journal of the American Accounting Association, data across more than 11,000 distressed companies from 2004 through 2012 suggests companies in trouble can shop for a new audit firm that is less likely to raise red flags on company performance. The study says “opinion shopping” is correlated to less transparency, reduced audit quality, and greater likelihood of audit reporting failures.
