Study: ‘Opinion-Shopping’ Harms Auditor Independence

A recent study has revealed that most distressed companies have sought out auditors likely to provide a favorable opinion.

The benefit of a favorable opinion, however, comes at the expense of auditor independence and investor interests, according to, which reported on the study published in the May issue of the American Accounting Association magazine, Auditing: A Journal of Practice and Theory.

Most of the 3,560 distressed public companies studied over nine years engaged in auditor “opinion-shopping,” the report says.

The result is a lower possibility of going-concern opinions but a higher incidence of financial misstatements. The research also says that the Sarbanes-Oxley corporate reform legislation did not affect the dynamic much. While opinion-shopping sharply declined between 2004 and 2006, it later returned to roughly the same amount before establishment of the PCAOB.

“This study highlights the need to develop mechanisms that curb clients’ opportunistic auditor switches, such as regulatory intervention in the choice of a successor auditor or other mechanisms that discipline excessive client pressure,” the authors wrote.

An estimated 57% of the studied companies “shopped” for opinions. Only 16% received going-concern opinions of the shoppers, compared with 28% among non-shoppers.

The report also says, “Audit firms and offices that more frequently accept opinion-shopping clients tend to exhibit poorer audit quality not only for switching opinion-shoppers but for other clients.”