A new study questions the usefulness of proxy advisory services in helping corporate boards of directors and investors decide whether to keep or change auditing firms.
The study, by Lauren M. Cunningham of the University of Tennessee Knoxville, found that audit firms are rarely rejected when auditor ratification ballots are included in the proxy materials sent annually to shareholders. However, the study, which appears in the March issue of the quarterly journal Accounting Horizons, published by the American Accounting Association, found some evidence from two earlier studies that auditor ratification does matter to company directors and investors. The new study examined how much auditor ratification votes contribute to improved accounting and advance the interests of companies and shareholders. The paper suggested auditor ratification leaves much to be desired.
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