{"title":"Auditors’ hometown ties and audit quality","authors":"Yingwen Deng , Ziyi Zhang , Yunjing Liu","doi":"10.1016/j.jaccpubpol.2023.107137","DOIUrl":null,"url":null,"abstract":"<div><p>We investigate the relationship between hometown ties among the engagement and review auditors and audit quality by utilizing the data of signing auditors’ hometowns in China during 2007–2019. The results show that hometown ties between the engagement and review auditors are negatively associated with audit quality, as hometown ties can impair peer monitoring and reduce team diversity. Through cross-sectional analyses, we observe that this negative association is mitigated when signing auditors are from Big 10 audit firms, when clients are subject to stronger external supervision, and when signing auditor teams have a higher level of diversity. Besides, the additional analysis indicates that investors perceive the compromised audit quality associated with hometown ties and discount the value of firms. The main result holds in robustness tests and when considering potential endogeneity. Our study adds to the existing literature on audit teams and provides practical and policy insights.</p></div>","PeriodicalId":48070,"journal":{"name":"Journal of Accounting and Public Policy","volume":null,"pages":null},"PeriodicalIF":3.3000,"publicationDate":"2023-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Accounting and Public Policy","FirstCategoryId":"91","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0278425423000972","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We investigate the relationship between hometown ties among the engagement and review auditors and audit quality by utilizing the data of signing auditors’ hometowns in China during 2007–2019. The results show that hometown ties between the engagement and review auditors are negatively associated with audit quality, as hometown ties can impair peer monitoring and reduce team diversity. Through cross-sectional analyses, we observe that this negative association is mitigated when signing auditors are from Big 10 audit firms, when clients are subject to stronger external supervision, and when signing auditor teams have a higher level of diversity. Besides, the additional analysis indicates that investors perceive the compromised audit quality associated with hometown ties and discount the value of firms. The main result holds in robustness tests and when considering potential endogeneity. Our study adds to the existing literature on audit teams and provides practical and policy insights.
期刊介绍：
The Journal of Accounting and Public Policy publishes research papers focusing on the intersection between accounting and public policy. Preference is given to papers illuminating through theoretical or empirical analysis, the effects of accounting on public policy and vice-versa. Subjects treated in this journal include the interface of accounting with economics, political science, sociology, or law. The Journal includes a section entitled Accounting Letters. This section publishes short research articles that should not exceed approximately 3,000 words. The objective of this section is to facilitate the rapid dissemination of important accounting research. Accordingly, articles submitted to this section will be reviewed within fours weeks of receipt, revisions will be limited to one, and publication will occur within four months of acceptance.
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