Investor dissatisfaction toward auditors

Shareholders, as owners of the firm, ofren are sought to ratify manage-ment’s selection of an auditor through a formal vote during the annual shareholders ’ meeting. This vote represents the primary vehicle for inves-tor communication concerning auditor-related issues and, thus, can be used as an indicator of investor dissatisfaction with the auditor. This study proposes to measure shareholders ’ dissatisfaction with the auditor through the shareholders ’ auditor ratifcation vote. We identify attributes associated with high levels of investor dissat-isfaction and then determine if a high level of investor dissatisfaction is associated with a subsequent change in a jrm’s auditor. We determined that investor dissatisfaction is associated with a j r m having engaged a less credible auditor and the issuance of a going concern audit opinion. In addition, we find that investors react strongly to the unexpected issu-ance of a going concern opinion. Finally, we discovered that managers are sensitive to shareholder dissatisfaction signals by noting a higher oc-currence of auditor changes for firms with high investor dissatisfaction. 1