IDEAS home Printed from https://ideas.repec.org/a/taf/rcjaxx/v1y2013i3-4p221-235.html
   My bibliography  Save this article

PCAOB inspections, auditor reputation, and Chinese reverse merger frauds

Author

Listed:
  • Ran Zhang
  • Si Chen
  • Jianfeng Wang

Abstract

This paper examines whether Public Accounting Oversight Board (PCAOB) inspections decrease fraud likelihood in the Chinese reverse merger firms’ accounting crisis and whether auditor reputation moderates this relationship. By analyzing Chinese firms listed in the US stock markets through reverse merger (RM) during 2001–2011, we find that PCAOB inspections significantly decrease accounting fraud likelihood for RM firms, especially for auditors with low reputation. But this relationship does not hold for Chinese initial public offering (IPO) firms listed in the US. The reason may be that 84.68% of IPO firms hire Big 4 accounting firms, whose reputation substitutes for PCAOB inspections. Overall, our results indicate that PCAOB inspections help prevent financial frauds, but only for firms hiring non-Big 4 auditors.

Suggested Citation

  • Ran Zhang & Si Chen & Jianfeng Wang, 2013. "PCAOB inspections, auditor reputation, and Chinese reverse merger frauds," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 1(3-4), pages 221-235, December.
  • Handle: RePEc:taf:rcjaxx:v:1:y:2013:i:3-4:p:221-235
    DOI: 10.1080/21697221.2013.857816
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/21697221.2013.857816
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/21697221.2013.857816?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:rcjaxx:v:1:y:2013:i:3-4:p:221-235. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rcja .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.