Journal article
Auditor Disaffiliation Program in China and Auditor Independence
Auditing, Vol.28(1), pp.29-51
2009
Abstract
This study examines whether the disaffiliation program introduced by the Chinese government improved auditor independence and whether auditor quality affects this relationship. Auditor independence is measured in terms of the likelihood of receiving a qualified report and the level of earnings management (measured by noncore operating income). The results show that the likelihood of receiving qualified audit opinions for listed companies significantly increased, and noncore operating earnings significantly decreased, after auditors were disaffiliated. However, companies audited by auditors without any affiliation also showed an increase in the likelihood of receiving qualified opinions and a decrease in noncore operating earnings, possibly because of the increased surveillance by the regulatory bodies that accompanied the act of disaffiliation. The results also show that the association between the disaffiliation program and the likelihood of receiving qualified audit opinions is stronger for small auditors than for large auditors, possibly because of the initial lower audit quality of small auditors. Auditor size, however, did not significantly affect the association between the disaffiliation program and noncore operating earnings.
Details
- Title
- Auditor Disaffiliation Program in China and Auditor Independence
- Authors
- Ferdinand A. Gul (Author) - Hong Kong Polytechnic UniversityHeibatollah Sami (Author) - Lehigh UniversityHaiyan Zhou (Author) - The University of Texas Rio Grande Valley
- Publication details
- Auditing, Vol.28(1), pp.29-51
- Publisher
- American Accounting Association
- DOI
- 10.2308/aud.2009.28.1.29
- ISSN
- 1558-7991
- Organisation Unit
- University of the Sunshine Coast, Queensland; School of Business and Creative Industries
- Language
- English
- Record Identifier
- 99679189502621
- Output Type
- Journal article
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