EC series Working Papers

WP-EC 2016-02

Opinion shopping: Partner versus firm-level evidence

Beatriz García Osma, Belén Gill de Albornoz Noguer and Elena De las Heras Cristobal


We study the strategies, timing and relative outcomes obtained by companies that attempt to shop for more favorable audit opinions both at the firm and at the partner level. Using a uniquely long time series of Spanish firms’ data, we employ the Lennox's (2000) methodology and find evidence of successful opinion-shopping through voluntary firm switching. In contrast, our results suggest that voluntary audit partner switches are associated with a fresh eye effect. Additionally, we document that firm switching activity is more likely when prior attempts to shop for an opinion were unsuccessful. Finally, we show that the fresh eyes effect associated with partner switching disappears when partner rotation becomes mandatory; and that under such a regulatory setting firm-level opinion-shopping is still pervasive.

Keywords: opinion-shopping, auditor switches, modified audit reports, mandatory partner rotation.

JEL classification: M42, M48

DOI: http://dx.medra.org/10.12842/WPASEC-2016-02


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