Financial Attributes and Auditor Choice: Evidence from Listed Services Firms

Abstract

The dominance of Big 4 audit firms in the audit market has led to intense competition for high
quality audit services. This study investigates the factors influencing the choice of external 
auditors, specifically focusing on how firm financial attributes attract Big 4 auditors in Nigerian 
listed service firms. We employed a correlational research design and used a census sampling 
technique to analyse data from 2014 to 2023. Using panel logit regression, the results revealed 
that profitability and auditor selection are negatively related, suggesting that more profitable firms 
are less likely to choose a Big 4 auditor. Conversely, higher liquidity was positively associated 
with the choice of a Big 4 auditor. Firm growth, however, wasn't found to be significantly related 
to auditor choice. The study recommends that firms should prioritise their financial health, 
particularly profitability and liquidity, to boost their appeal to reputable auditors. Additionally, 
regulatory bodies should continue monitoring the audit market to ensure high audit quality 
standards are maintained.