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High-speed railways, audit partner changes across audit offices and audit quality: Evidence from China

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  • Hung Chan, K.
  • Liu, Qiliang
  • Mo, Phyllis Lai Lan
  • Tian, Li

Abstract

The development of high-speed railways (HSRs) has significant regional economic and social implications. We study a micro externality of such development, namely the impact of HSRs on audit firms' human resource allocation and audit quality. Specifically, we investigate the relationship between the availability of HSRs and audit partner changes across audit offices in China which involves a simultaneous change in audit partner and audit office to reallocate human resources. We find that the advent of HSRs between clients and audit offices increases the likelihood of audit partner changes across audit offices especially for predecessor audit offices with severe human resource constraints due partly to the mandatory auditor rotation requirement. Such audit partner changes across audit offices most likely are reciprocal over time, occur within the optimal HSR transportation interval and can significantly improve audit quality in terms of reducing excessive financing reporting discretions, misstatements and regulatory sanctions, but exert no effect on audit fees. Our study has implications for audit firms’ human resource management in light of infrastructure improvements and for audit policy makers to evaluate the standards for audit partner rotations.

Suggested Citation

  • Hung Chan, K. & Liu, Qiliang & Mo, Phyllis Lai Lan & Tian, Li, 2025. "High-speed railways, audit partner changes across audit offices and audit quality: Evidence from China," The British Accounting Review, Elsevier, vol. 57(3).
    • Handle: RePEc:eee:bracre:v:57:y:2025:i:3:s0890838924002865
    DOI: 10.1016/j.bar.2024.101506
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    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

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