Auditors' Organizational Form, Legal Liability, and Reporting Conservatism: Evidence from China

• 成果类型: Article
• 署名作者: Firth, Michael; Mo, Phyllis L. L.; Wong, Raymond M. K.
• 署名单位: Lingnan University; City University of Hong Kong
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/j.1911-3846.2011.01081.x
• 发表日期: 2012
• 页码: 57-+
• 关键词: CORPORATE GOVERNANCE; QUALITY; REGIMES; INDEPENDENCE; LITIGATION; management; OWNERSHIP; STANDARDS

摘要

This study uses a unique institutional setting in China to investigate empirically the association between the organizational form of CPA firms (unlimited liability versus limited liability) and the reporting conservatism of auditors. Based on a sample of 5,007 audits of Chinese listed companies from the period 2000-2004, we find that auditors in unlimited liability partnership firms are more likely to issue modified audit opinions than are auditors in limited liability CPA firms. This auditor conservatism stems from distressed firms with going-concern opinions, and we find no statistical evidence that partnerships give more modified opinions for nondistressed firms. In addition, auditors are less likely to issue modified reports after they incorporate the firm in the limited liability form. These analyses support our hypothesis that a limited liability regime induces lower auditor reporting conservatism. Our study contributes to the broader debate on liability reform in the auditing profession.