Determinants of auditor change among companies listed on Nairobi Securities Exchange
Clients may incur both direct and indirect costs when they decide to change auditors, so questions arise in the reasons behind auditor change when there are direct and indirect costs with it. Different factors may have an impact on auditor change. Thus, the aim of this study was to determine the factors that influence auditor changes by companies listed on Nairobi Securities Exchange. This study was designed as a correlation design. The population was 60 listed firms at the Nairobi Securities Exchange. Primary data was collected using questionnaires administered through drop and pick method. Analysis was carried out using descriptive analysis and conditional logit regression analysis. The study found that the determinants of auditor switch were auditor's lack of industry expertise, management change, change of auditor at the head office, and demand by the shareholders. The factors that significantly informed firms not to switch auditors were affordable fees, satisfactory quality of audit, shareholders demand, auditor's good reputation, accessibility of auditor, timeliness of audit report, lack of reporting disputes, demand by the head office, and unsurpassed industry expertise. The study concludes that other than the mandatory rotation requirement for listed firms, client firm-specific factors, audit firm specific factors, and key stakeholder factors influence decision to retain or to change the auditor. These findings have important implications for audit firms operating in Kenya. First, audit firms should ensure that their expertise as regards advisory and audit to various industries is impeccable if they are to be retained by their clients. Audit firms also need to charge fees that are affordable to firms as this is a major determinant of their retention. Further, audit firms should endeavor to do quality audits, maintain good reputation, be accessible to clients for any consultations, and present audit reports in time.