Auditor-client reciprocity: Evidence from forecast-issuing brokerage houses and forecasted companies sharing the same auditor

• 成果类型: Article
• 署名作者: Fung, Simon Yu Kit; Jiang, Like; Pittman, Jeffrey; Wang, Yu; Zhang, Shafu
• 署名单位: Deakin University; University of Melbourne; Memorial University Newfoundland; Virginia Polytechnic Institute & State University; Dongbei University of Finance & Economics; Hunan University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12856
• 发表日期: 2023
• 页码: 1823-1855
• 关键词: nonaudit service fees; social ties; QUALITY; analysts; earnings; reputation; matter; CHINA; performance; accuracy

摘要

We examine whether auditors share private information about some clients in their portfolio to benefit other clients (i.e., brokerage houses). This is a salient issue in China, where there are concerns about auditors leaking information to related parties, and where we observe variation in connectedness between brokerage houses and companies through shared auditors. We document that brokerage houses that share an auditor with a company issue comparatively more accurate earnings forecasts for that company. Next, cross-sectional variation in forecast accuracy is associated with several proxies for brokerage houses' and auditors' costs and incentives to share information (e.g., investor protection, media coverage, public listing status, and the client's economic importance). Finally, auditors are more likely to secure future audits from IPO deals sponsored by brokerage house clients with higher forecast accuracy. Collectively, our evidence is suggestive of auditors sharing private information with brokerage houses in anticipation of reciprocity in the form of lucrative future engagements.