| Summary: | 碩士 === 國立成功大學 === 會計學系碩博士班 === 100 === This study aims to examine the relationship between high risk financial assets and auditor switches after financial crisis. The collapse of Leman Brother leads to damage the reputation of Ernst ＆ Young. As a result, our study focus on Ernst ＆ Young’s clients that are financial institutions in the U.S., and examine whether company with high risk financial assets are inclined to switch to higher quality accounting firm.
Statement of Financial Accounting Standards No. 157 (FAS No. 157) classifies the information used in fair value measurements into three levels by the liquidity of assets. For level 3 fair value assets, which show a lower level of liquidity, it may cause high system risk and information asymmetry. This study focuses on the influence of high risk financial assets on auditor switching from Ernst ＆ Young to industry specialist. Furthermore, our study examines whether Ernst ＆ Young’s financial institution clients benefit from the poor reputation of Ernst ＆ Young and resulted in lower audit fees charged.
The empirical results indicated that the clients of Ernst ＆ Young with more high risk financial assets were inclined to switch to industry specialist after financial crisis. Furthermore, we found that Ernst ＆ Young’s clients, who didn’t switch auditor after the financial crisis, have lower audit fees. The evidence implied that the accounting firms with poor reputation will charge lower audit fees in order to keep their clients.
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