Government ownership, institutions, and auditor reporting behavior

Document Type


Source Publication

Accounting Association 2009 Annual Meeting

Publication Date



This paper updates and extends Chan, Lin, and Mo (2006) by testing whether differences in institutional development have a significant impact on auditor reporting behavior. We base our tests on regional differences in China during the 1996-2006 period. Adopting a within-country setting, which precludes cross-country confounding factors, this paper finds that in regions with less developed institutions, local auditors are more likely than non-local auditors to issue standard unqualified opinions to local state-owned enterprises (SOEs). In addition, compared with local auditors in strong institutional regions, local auditors in weak institutional regions are relatively more likely to issue unqualified audit reports to local SOEs. Our findings have implications for legislators and regulators in China and other transitional economies: for countries striving to foster a credible independent auditing profession, improvement in institutional structures is essential.



Recommended Citation

Chan, K. H., Lin, K. Z., & Wong, B. Y. (2009, Aug). Government ownership, institutions, and auditor reporting behavior. Paper presented at American Accounting Association 2009 Annual Meeting, New York.

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