“Auditor selection and its impact on profitability of Organizations”

Abstract

In the present days of emerging market and corporate scandals such as financial crisis task of the firm’s performance and way of improvements are important for the companies, investors and others party. There is one way that the impact of firm performance is auditor selection, which is known as external monitoring of the financial performance of the firm. So the purpose of the study is the examination of the impact of the auditor selection on the firm’s performance for listed companies in the banking sectors. In this report, I show the use of audit fees and organizations rotation as techniques for auditor selection and the quality of the audit. The return on asset is the way to measure the firm performance. I found that there is a close relationship between the audit quality and ROA. Now a day’s companies are changing the auditor more frequently than in the past to judge the performance of the firms and find out the differences. Nowadays in the emerging market and after corporate scandals as well as financial crisis the issue of firm performance and ways to improve it are crucial for companies, investors and third parties. One of the ways that it can impact firm performance is audit quality, which it is recognize as external monitoring. Therefore, the purpose of this research is to examine the impact of audit quality on firm performance for Malaysian listed companies for the period of 2003 to 2012. In this study, we use audit fees and audit firm rotation as proxies for audit quality. Return on assets and Tobin’s q are used as measures for firm performance. We found that there is insignificant relationship between audit quality proxies (audit fees and audit firm rotation) and ROA. We also found that an audit fee is significantly and positively related to Tobin’s Q. However, audit firm rotation is insignificantly related to Tobin’s Nowadays in the emerging market and after corporate scandals as well as financial crisis the issue of firm performance and ways to improve it are crucial for companies, investors and third parties. One of the ways that it can impact firm performance is audit quality, which it is recognize as external monitoring. Therefore, the purpose of this research is to examine the impact of audit quality on firm performance for Malaysian listed companies for the period of 2003 to 2012. In this study, we use audit fees and audit firm rotation as proxies for audit quality. Return on assets and Tobin’s q are used as measures for firm performance. We found that there is insignificant relationship between audit quality proxies (audit fees and audit firm rotation) and ROA. We also found that an audit fee is significantly and positively related to Tobin’s Q. However, audit firm rotation is insignificantly related to Tobin’s Nowadays in the emerging market and after corporate scandals as well as financial crisis the issue of firm performance and ways to improve it are crucial for companies, investors and third parties. One of the ways that it can impact firm performance is audit quality, which it is recognize as external monitoring. Therefore, the purpose of this research is to examine the impact of audit quality on firm performance for Malaysian listed companies for the period of 2003 to 2012. In this study, we use audit fees and audit firm rotation as proxies for audit quality. Return on assets and Tobin’s q are used as measures for firm performance. We found that there is insignificant relationship between audit quality proxies (audit fees and audit firm rotation) and ROA. We also found that an audit fee is significantly and positively related to Tobin’s Q. However, audit firm rotation is insignificantly related to Tobin’s That’s why a good auditor selection process is important in which way of process of auditor selection can be performed most effectively. For a good selection process is suitable to participate in the debate to achieve the following goal. To create a good auditor selection process the firm should focus on the quality of the audit to get a good audit for the firm. From this study, it is helpful to know that every firms on company cited for a quality full auditor or audit firm for their excellent quality controls share ideas and techniques on how improve audits while saving time and increase profits of the firms. An efficient helps the company to detect errors and frauds at the beginning and provide actual views about financial information. This task based on secondary date of collected from previous annual reports and financial statements. By achieving audit efficiency the company’s would be more profitable. Manage and train the client, Retain clients and staff & Plan Property etc. The auditor should relate the audit efforts with the level of risk and materiality is more efficient way.