Referral as a determining factor for changing auditors in the Belgian auditing market: An empirical study

Traditional research on auditor choice and auditor switching focuses on company and audit (or) characteristics such as size and reputation, level of fees, or audit opinion. These studies seek causal relationship between changes in these characteristics and changes in auditor. This article claims that the conclusions of existing research have limited application to smaller companies in a small open economy like Belgium. We see a need to supplement the research model to reflect the fact that the decision to choose or switch auditors in subsidiary companies often occurs at the parent level and is determined by group characteristics rather than local characteristics of the subsidiary. In this article, we show that “referral,” the situation whereby the subsidiary—encouraged by the parent company—appoints the same auditor as the parent company, must be considered as an explanatory variable to understand audit-switching behavior in Belgium.