Title
A political-economic analysis of auditor reporting and auditor switches
Document Type
Journal article
Source Publication
Review of Accounting Studies
Publication Date
3-1-2006
Volume
11
Issue
1
First Page
21
Last Page
48
Publisher
Springer New York LLC
Keywords
Audit qualifications, Auditor locality, Auditor switches, Economic dependence, Political influence
Abstract
This study examines whether auditor opinions are affected by political and economic influences from governments. We use auditor locality (local versus non-local) to capture such influences from local governments in China. Based on data from China's stock markets for the period 1996-2002, we find that local auditors, who have greater economic dependence on local clients and are subject to more political influence from local governments than non-local auditors, are inclined to report favorably on local government-owned companies to mitigate probable economic losses. Moreover, companies with qualified opinions are more likely to switch from a non-local auditor to a local auditor than companies with unqualified opinions. Contrary to some prior studies, we find that in China's political environment, local government-owned companies that switched from a non-local auditor to a local auditor after receiving a qualified opinion can succeed in opinion shopping.
DOI
10.1007/s11142-006-6394-z
Print ISSN
13806653
E-ISSN
15737136
Publisher Statement
Copyright © Springer Science+Business Media, Inc. 2006
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Chan, K. H., Lin, K. Z., & Mo, P. L.-l. (2006). A political-economic analysis of auditor reporting and auditor switches. Review of Accounting Studies, 11(1), 21-48. doi: 10.1007/s11142-006-6394-z
