Partner-Level internal control opinion shopping and its economic consequences: Evidence from “SOX 404” in an emerging market

IF 3.3 3区 管理学 Q1 BUSINESS, FINANCE
Yingwen Guo , Yingjie Guo , Phyllis Lai Lan Mo , Xu Zhang
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引用次数: 1

Abstract

This study examines whether firms engage in internal control opinion shopping (ICOS) at audit partner level and its economic consequences. Based on the Chinese setting where the identities of audit partners are publicly disclosed and the requirements for internal control reporting are akin to SOX 404, we do find that firms successfully engage in ICOS at partner level. Furthermore, partner-level ICOS is associated with lower earnings quality and more tunneling activities. However, it seems that investors are not able to perceive the ICOS behavior, as evidenced by the indistinguishable market reactions to earnings announcements between ICOS firms and their counterparts. Moreover, successful partner-level ICOS firms do not remedy their internal control weaknesses in a timely manner and are more likely to receive sanctions from regulators. Further analyses suggest that firms engaged in partner-level ICOS are more likely to be charged with higher audit fees and firms whose CEOs are about to retire in the near future are more likely to conduct ICOS. This study fills the gap in the literature by investigating the outcomes of and market reactions to opinion shopping in the context of internal controls.

合伙人层面的内部控制意见购买及其经济后果:来自新兴市场“SOX 404”的证据
本研究探讨会计师事务所是否在审计合伙人层面进行内部控制意见购买(ICOS)及其经济后果。基于中国审计合伙人身份公开披露和内部控制报告要求类似于SOX 404的环境,我们确实发现事务所成功地参与了合伙人层面的ico。此外,合伙人级别的ico与较低的收益质量和更多的隧道活动有关。然而,投资者似乎无法感知ICOS的行为,这可以从ICOS公司与同行之间的收益公告的难以区分的市场反应中得到证明。此外,成功的合作伙伴级ico公司没有及时纠正其内部控制弱点,更有可能受到监管机构的制裁。进一步的分析表明,从事合伙人级别ico的公司更有可能被收取更高的审计费用,而ceo即将在不久的将来退休的公司更有可能进行ico。本研究通过调查内部控制背景下意见购物的结果和市场反应,填补了文献的空白。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
4.80
自引率
2.80%
发文量
75
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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