Does joining global accounting firm networks and associations affect audit quality and audit pricing? Evidence from China. Issue 6 (10th November 2021)

• Record Type: Journal Article
• Authors: Li, Wei; Liu, Huilong; Wang, Xizi
• Is Part Of: Accounting and business research. Volume 51:Issue 6/7(2021)
• Page Start: 677
• Page End: 706
• Publication Date: 2021-11-10
• Subjects: accounting firms -- networks -- associations -- audit quality -- audit pricing; Accounting -- Periodicals; Accounting -- Research -- Periodicals; Business -- Periodicals; Comptabilité -- Périodiques; Comptabilité -- Recherche -- Périodiques; Affaires -- Périodiques; Accounting; Electronic journals; 658.15
• DOI: 10.1080/00014788.2020.1824115
• Languages: English
• ISSNs: 0001-4788

Abstract

Abstract : This study investigates the impact of accounting firms joining global accounting firm networks and associations (AF N&As) on audit quality and audit pricing in China. We find that after their accounting firms join global AF N&As, client firms' accrual-based earnings management is reduced. However, we find no evidence that audit fees are significantly affected. Cross-sectional analysis suggests that improvements in audit quality resulting from accounting firms joining global AF N&As are more pronounced when auditors have less audit experience, clients have more subsidiaries or auditor tenure is shorter. Additional tests suggest that joining AF N&As reduces the likelihood of accounting firms being dismissed by clients and increases the market share of the accounting firms.