February 11, 2015

When M&A Actors Share Auditors, Targets Get The Short Straw

In this blog, Francine McKenna parses a new study – “Shared Auditors in Mergers and Acquisitions” – that documents a novel auditor conflict of interest. As Francine notes, data suggests that when an acquiring company and its target share the same auditor, the audit firms favor acquirers at the expense of audit clients who are M&A targets. These findings also strongly suggest that auditors prioritize their own self-interest and larger clients over smaller ones, and their public duty, when an M&A opportunity forces a choice between audit clients in the firm’s client portfolio.