Geographically dispersed signing auditors and audit quality

We examine how audit quality is affected by spatial arrangements of the audit team, specifically when the signing partners are geographically located in different provinces in China. Our baseline results show that dispersed signing auditors are related to higher audit quality and less audit opinion shopping. Further results suggest that this may be related to the better information and higher level of auditor independence for the geographically dispersed partners, and the effect is strongest when both channels are at work. Additional analyses show that the effect is weaker when coordination costs for geographical dispersion are higher, and we find that dispersed auditors are not related to higher audit fees or longer audit report lag. Overall, our findings underscore the positive influence of signing auditors’ geographical dispersion on audit quality.