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Diversity of signing auditors and audit quality: Evidence from capital market in China

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  • Athavale, Manoj
  • Guo, Zhaorui
  • Meng, Yun
  • Zhang, Tianshu

Abstract

We examine whether the diversity of signing auditors affects audit quality of listed firms in China. Using the Blau's index of diversity measure based on eight characteristics of signing auditors and a series of audit quality proxies, including modified audit opinions (MAO), restatement of annual financial reports (Restate), and discretionary accruals (DA), we document a negative relationship between the diversity of signing auditors and firms' audit quality. Additional analyses show that corporate governance, signing auditor and audit firm characteristics moderate the relationship between the diversity of signing auditors and audit quality. Our findings suggest that reducing the diversity of signing auditors is an effective way to improve audit quality.

Suggested Citation

  • Athavale, Manoj & Guo, Zhaorui & Meng, Yun & Zhang, Tianshu, 2022. "Diversity of signing auditors and audit quality: Evidence from capital market in China," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 554-571.
    • Handle: RePEc:eee:reveco:v:78:y:2022:i:c:p:554-571
    DOI: 10.1016/j.iref.2021.12.020
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    More about this item

    Keywords

    Diversity of signing auditors; Audit quality; Modified audit opinion; Earnings management;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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