Monitor objectivity with important clients : Evidence from auditor opinions around the world

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)263-294
Journal / PublicationJournal of International Business Studies
Issue number3
Online published1 Oct 2015
Publication statusPublished - Apr 2016


We examine whether monitors are likely to compromise their monitoring objectivity in the face of economically important clients in international business settings. In the context of external auditing and assurance services, we measure monitor objectivity by whether auditors are more (or less) likely to issue to their important clients modified audit opinions, that is, audit opinions provided to outside investors about the firm that demotes explicit areas of concern. Using a large cross-country sample, we document that auditors are more likely to issue modified opinions to their economically important clients relative to other clients. Furthermore, we find that this association is stronger (1) for Big N auditors, (2) for multinational audit clients, and (3) in countries with stronger legal regimes. These results suggest that monitors prioritize the protection of their reputation over lucrative economic relationships, and such information certification function is more pronounced for international auditors, multinational client firms, and in strong legal regimes.

Research Area(s)

  • multiple regression analysis, institutional theory, monitor objectivity, auditing, multinational corporations (MNCs) and enterprises (MNEs)