The emerging competitive market (audit and capital) in Iran as a result of regulatory changes has created a unique opportunity for researchers, especially in the auditing area. As a result of regulatory changes, there have been significant changes in the capital market and auditing environment in Iran that lead to auditor switches, thus emerging concerns about auditors’ independence and audit quality. The new situation may have impaired auditor independence and audit quality by providing an opportunity to companies to opinion shop using auditor changes. The aim of this research is to determine the factors associated with auditor changes. The sample includes 1721 observations of Tehran Stock Exchange (TSE) listed companies from 1999 to 2003. The logit analysis is used to analyse the data. The findings indicate that the following factors are associated with auditor changes in Iran: earnings management (discretionary accruals), regulatory change (emerging intense competition between auditors), interaction between changes in public sector ownership and CEO, and interaction between changes of board members and chairman. In general, the findings support the idea that the implementation of the privatisation policy and the regulatory changes has created significant changes in the capital market and audit environment in Iran.

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