The influence of non-behavioural factors in auditor switching in the Maltese market

Abstract

PURPOSE: The objectives of this study are to ascertain which are the nonbehavioural factors that induce auditor removals and auditor resignations. Moreover, the aim is to identify the most significant and applicable nonbehavioural factor in the Maltese scenario. Finally, the last objective is to identify whether non-behavioural factors supersede behavioural factors with respect to auditor changes. DESIGN: A regression model is developed to examine which are the most significant non-behavioural factors with regards auditor removals and resignations. Semi structured in-depth interviews and a focus group are further conducted in order to substantiate the findings from the model. FINDINGS: This study reports that the most significant non-behavioural factors which induce auditor change in Malta are the change in the parent’s company auditor and change in the auditor size strata. The regression model showed a predicted value of 10.4%. This means that the other 90% could be arising from behavioural factors which were not included in this study. Therefore, it can be concluded that, after such a low predicted value, behavioural factors supersede non-behavioural ones with regards to auditor changes. CONCLUSION: This study concludes that, in Malta, the most significant nonbehavioural factors with regards to auditor change are the change the parent’s company auditor and the change in the auditor size. Finally, it was acknowledged that in such a small place like Malta, behavioural factors supersede nonbehavioural factors with regards to auditor removals and resignations. VALUE: The strength of this study lies in the fact that it is the first study which investigates the behaviour of the non-behavioural factors with regard auditor changes in Malta through a regression model and compares the results with behavioural factors. Moreover, it is the first study which features the change in the parent’s auditor as a significant non-behavioural factor in Malta.