The Clan Effect: Exploring the Nexus Between Organizational Culture, Trust, and Audit Economics

This research investigates the impact of clan cultures and special trust on audit fees within Chinese organizations, elucidating a unique cultural facet of financial oversight in the knowledge economy, innovation, and technology management. By integrating Social Identity Theory, Resource Dependency Theory, and Institutional Theory, the study examines how clan-based cultural dynamics influence auditor–client interactions and auditing practices, affecting audit fees independently of workload considerations. Utilizing quantitative data from 44,375 firms, our analysis reveals that clan cultures necessitate increased auditor effort and prolonged audit tenure, leading to inflated audit fees. This phenomenon underscores the importance of understanding cultural dimensions in the enhancement of audit quality and financial reporting integrity. The findings contribute to the knowledge economy by highlighting the interplay between cultural trust and organizational dynamics in financial oversight, proposing a need for culturally sensitive audit strategies that balance innovation and traditional values. This study not only enriches the literature on auditing and cultural studies but also offers practical insights for auditors, regulatory bodies, and organizations in culturally diverse contexts, advocating for the integration of entrepreneurship and knowledge management practices in auditing to navigate the complexities of clan cultures effectively.