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The emergence of second-tier auditors in China: analysis of audit fee premium and audit quality

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  • Noel W. Leung
  • Julia Junxia Liu
  • Brossa Wong

Abstract

Strong government support for the growth of domestic audit firms has contributed to the emergence of second-tier auditors as an alternative to the Big 4 for Chinese listed companies in the post-2007 period. This paper examines audit fee and audit quality differences across the Big 4, second-tier auditors, and other small auditors. Controlling for auditor choice bias, we find the Big 4 earn a fee premium relative to second-tier auditors, although the audit quality between them is indistinguishable. Relative to other small auditors, however, second-tier auditors earn a fee premium that is accompanied by superior audit quality.

Suggested Citation

  • Noel W. Leung & Julia Junxia Liu & Brossa Wong, 2019. "The emergence of second-tier auditors in China: analysis of audit fee premium and audit quality," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 26(6), pages 684-708, November.
    • Handle: RePEc:taf:raaexx:v:26:y:2019:i:6:p:684-708
    DOI: 10.1080/16081625.2017.1404920
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    Cited by:

    1. Cheng, C.S. Agnes & Hu, Gang & Yu, Danlei Bonnie, 2022. "CAFR 1999–2021, the past two decades and a look ahead," Journal of Financial Stability, Elsevier, vol. 60(C).

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