Author:

Keywords:

Social Sciences, Social Issues, auditor choice, nonprofit organization, contribution, financial reporting, auditor industry expertise, ORGANIZATIONS MANAGE EARNINGS, NONPROFIT ORGANIZATIONS, RESOURCE DEPENDENCE, REPORT LAGS, QUALITY, FEES, SPECIALIZATION, VOLUNTARY, SECTOR, 1503 Business and Management, 1605 Policy and Administration, 1607 Social Work, Political Science & Public Administration, 3507 Strategy, management and organisational behaviour, 4407 Policy and administration

Abstract:

© 2017, © The Author(s) 2017. This study examines economic consequences of auditor choice in the Belgian nonprofit (NP) setting, where the identity of both the audit firm and the audit partner is required to be disclosed. Specifically, we examine the influence of auditor choice in favor of an auditor with industry expertise on future contributions (being the sum of donations and grants) received among a large sample of Belgian nonprofit organizations (NPOs). Consistent with a signaling perspective, our results indicate that NPOs benefit from engaging an audit partner with industry expertise, by positively influencing future contributions received by the NPO. However, we observe no significant effect of audit firm industry expertise on future contributions received. Our results therefore suggest that NPOs’ resource providers presume that industry expertise is situated at the signing partner level rather than at the audit firm level.