Auditor choice in Italian non-listed firms
ISSN: 0268-6902
Article publication date: 4 April 2016
Issue publication date: 4 April 2016
Abstract
Purpose
This paper aims to investigate auditor choice in those Italian non-listed firms adopting the “traditional” model of corporate governance. In Italy, non-listed firms can choose between two types of auditor: the Board of Statutory Auditors (BSA), that is the statutory auditors, or an “external” auditor. At the same time, a BSA conducts the administrative auditing for all companies with equity exceeding €120,000.
Design/methodology/approach
The paper estimates a logistic regression model of firm auditor choice between an external auditor and the BSA, which incorporates variables proxying for both agency conflict and organizational complexity effects.
Findings
The results show that of the potential agency factors, only board independence drives auditor choice, whereas organizational complexity and risk factors including firm size, investment in inventories, subsidiary status and complexity drive auditor choice. These results may be explained in the administrative audit role of the BSA, which monitors both day-by-day firm operations and the financial statements preparation “project”. Stakeholders as a result are reassured that, in general, their interests are protected. Finally, it was found that legal form and voluntary International Financial Reporting Standards compliance exert an impact on auditor choice.
Originality/value
The paper provides support for an internal yet independent auditing body such as the Italian BSA as a wider model for corporate governance in European non-listed firms (OECD, 2004 and 2015). The BSA as an administrative and financial auditing body made up solely of independent highly qualified professionals can work within the firm on an operational basis, and in so doing can increase stakeholder protection.
Keywords
Citation
Matonti, G., Tucker, J. and Tommasetti, A. (2016), "Auditor choice in Italian non-listed firms", Managerial Auditing Journal, Vol. 31 No. 4/5, pp. 458-491. https://doi.org/10.1108/MAJ-07-2015-1215
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited