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Individual Auditor Conservatism After CSRC Sanctions

Author

Listed:
  • Jerry Sun

    (University of Windsor)

  • Steven F. Cahan

    (University of Auckland)

  • Jing Xu

    (Shanghai Lixin University of Commerce)

Abstract

This study examines whether sanctions imposed by the China Securities Regulatory Commission (CSRC) against individual auditors result in greater auditor conservatism. Using a difference-in-differences research design, we find that clients of sanctioned individual auditors have lower discretionary accruals in the post-sanction period than in the pre-sanction period when compared to a matched control group of clients audited by individual auditors who were not sanctioned. Our findings suggest that sanctions imposed by the CSRC on individual auditors can lead to improvements in audit quality by increasing the conservatism of the sanctioned auditors. That is, individual auditors are more likely to resist their clients’ income-increasing accounting manipulations after being sanctioned by the CSRC.

Suggested Citation

  • Jerry Sun & Steven F. Cahan & Jing Xu, 2016. "Individual Auditor Conservatism After CSRC Sanctions," Journal of Business Ethics, Springer, vol. 136(1), pages 133-146, June.
    • Handle: RePEc:kap:jbuset:v:136:y:2016:i:1:d:10.1007_s10551-014-2514-z
    DOI: 10.1007/s10551-014-2514-z
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    Cited by:

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    2. Kevin Koh & Li Li & Xuejiao Liu & Chunfei Wang, 2023. "The Effect of Audit Partner Diversity on Audit Quality: Evidence from China," Abacus, Accounting Foundation, University of Sydney, vol. 59(1), pages 340-380, March.
    3. Patrick Velte, 2023. "The impact of external auditors on firms’ financial restatements: a review of archival studies and implications for future research," Management Review Quarterly, Springer, vol. 73(3), pages 959-985, September.

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