Do Big 4 Auditors Enhance Audit Quality in China? A “Behind the Scenes Look”

IF 0.9 Q3 BUSINESS, FINANCE
Songsheng Chen, Gopal V. Krishnan, Wenying Li, Yinqi Zhang
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引用次数: 2

Abstract

We contribute to the debate on whether the “Big N effect” on audit quality is due to client self-selection by controlling for pre-audit earnings quality, an important variable omitted in prior research. Using proprietary data from the Chinese Institute of CPAs, we find that pre-audit earnings quality is higher for Big 4 clients. Controlling for pre-audit earnings quality, restatement frequency is lower for Big 4 clients than for non-Big 4 clients, but there is no significant difference in discretionary accruals between Big 4 and non-Big 4 clients. Our findings indicate that Big 4 and non-Big 4 auditors in China pursue different strategies to enhance audit quality. The Big 4 enhance audit quality by recruiting and retaining clients with higher earnings quality and acting more conservatively towards clients with a higher risk for earnings restatement. In contrast, non-Big 4 auditors enhance audit quality by requiring more downward audit adjustments.
四大会计师事务所是否提高了中国审计质量?“幕后观察”
我们参与了关于审计质量的“大N效应”是否是由于客户通过控制审计前盈余质量而进行的自我选择的争论,这是先前研究中遗漏的一个重要变量。使用中国注册会计师协会的专有数据,我们发现四大客户的审计前盈利质量更高。在控制审计前盈利质量方面,四大客户的重述频率低于非四大客户,但四大客户和非四大客户端的可自由支配应计项目没有显著差异。我们的研究结果表明,中国四大和非四大审计师在提高审计质量方面采取了不同的策略。四大会计师事务所通过招聘和留住盈利质量较高的客户,并对盈利重述风险较高的客户采取更保守的行动,提高了审计质量。相比之下,非四大审计机构通过要求更多的向下审计调整来提高审计质量。
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
1.40
自引率
16.70%
发文量
19
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