Impact of Cross-listed Directorship on Appointment and Independence of Auditors: Evidence from Republic of Macedonia
Impact of Cross-listed Directorship on Appointment and Independence of Auditors: Evidence from Republic of Macedonia

Summary/Abstract: This study investigates the association between cross-listed directors at multiple boards of directors and the choice of audit firm in emerging market economy such as Republic of Macedonia.The study involved all listed companies and companies with special reporting obligations at Macedonian Stock Exchange owned domestically, since appointment of auditors for subsidiary companies is influenced dominantly by parent company decision making process. Determinants of auditor selection are important input for overall assessment of auditor independence and audit quality and provide valuable argument for revised regulations in order to improve credibility of audit of financial statements. There is limited research available regarding the close relationship and ties between management and auditors, especially in the case of small audit markets where the potential impact of cross-listed directorship on auditor independence and audit quality is considerable. The results of the study provide little evidence of significant relationship between cross-listed directorship and the choice of auditor in respect of Macedonian listed entities. The findings will be of interest for public accounting firms in developing their strategies for close inter-relationships with those charged with governance. It is intended to help regulators assess the impacts of interpersonal relations to auditor independence and quality of assurance services provided to the general public, as well as improvement of monitoring function on behalf of shareholders.

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