Do auditors consider alleged bribery when accepting clients? Evidence from Chinese non-state-owned enterprises. Issue 6 (10th November 2021)

• Record Type: Journal Article
• Authors: Ruan, Lufei; Zhang, Haiyan
• Is Part Of: Accounting and business research. Volume 51:Issue 6/7(2021)
• Page Start: 744
• Page End: 776
• Publication Date: 2021-11-10
• Subjects: alleged bribery -- auditors' client acceptance -- audit fees -- non-state-owned enterprises (NSOE) -- earnings management; Accounting -- Periodicals; Accounting -- Research -- Periodicals; Business -- Periodicals; Comptabilité -- Périodiques; Comptabilité -- Recherche -- Périodiques; Affaires -- Périodiques; Accounting; Electronic journals; 658.15
• DOI: 10.1080/00014788.2020.1868283
• Languages: English
• ISSNs: 0001-4788

Abstract

Abstract : This study examines the relationship between firm-level alleged bribery and audit-related decisions for Chinese non-state-owned enterprises (NSOE). Using a sample of listed NSOEs in 2010–2016, we find that alleged bribery is negatively correlated with the probability of being accepted by top-tier auditors and is positively correlated with audit fees. These findings suggest that top-tier auditors are more reluctant to accept corrupt firms and also charge higher audit fees. Also, we find that the negative correlation between alleged bribery and the probability of being accepted by top-tier auditors is strengthened after an anti-corruption campaign launched by the Chinese government in 2013 and/or after the crackdown of provincial-level officials, and is more pronounced in less developed regions. Finally, we find that alleged bribery is positively associated with the level of earnings management, implying that alleged bribery likely increases irregularities in financial statements.