| Because of the role that the auditor plays in monitoring the activities of agents within an organizational environment where moral hazard problems exist, auditor changes should concern society. Specific reasons include: (1) the possible economic costs associated with a change, (2) the possible effects of auditor change on auditor independence, and (3) the information the auditor change reveals about the auditing environment.; The purpose of the study was to extend prior auditor change research into the public sector by developing and testing empirically a model of public sector auditor change. Texas independent school districts were used to represent the public sector. Eleven characteristics or events, developed from previous theoretical and empirical research, were hypothesized to be related to public sector auditor change. The hypotheses were classified into three categories representing possible sets of influences on auditor change: (1) the client-auditor relations set of hypotheses, (2) the economic set of hypotheses, and (3) the political set of hypotheses.; Data for the fiscal years August 31, 1982-August 31, 1984 from 87 school districts that changed auditor and 271 school districts that did not change auditor were used to construct a logistic regression model to examine the relationships between auditor change and its hypothesized determinants. The logistic regression model was significant at less than the.0001 level. The model supported three research hypotheses. These hypotheses were that public sector auditor change is related to: (1) an independent auditor's report of material internal accounting control weaknesses, (2) an independent auditor's report of school board violations of nepotism, pecuniary interest, or competitive bidding laws, and (3) a change in audit fees.; A conclusion of the study was that the possibility exists for school district officials to use their ability to institute changes in independent auditor to try to avoid the reporting of violations of Texas laws or regulations. Disclosure of the facts surrounding an auditor change by a Texas school district may decrease the possibility that school districts may exercise control over their independent auditor. An additional conclusion was that changes in audit fees are an important component of auditor change research. (Abstract shortened with permission of author.). |
