A political-economic analysis of auditor reporting and auditor switches
Author(s)
Author(s)
Lin, K. Z.
Mo, P. L. L.
Date Issued
2006
Publisher
Springer
Journal
Review of Accounting Studies
Volume
11
Issue
1
Start page
21
End page
48
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.
SFU Affiliated Publication
No
Availability at SFU Library
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