Do school ties between auditors and client executives influence audit outcomes?

• 成果类型: Article
• 署名作者: Guan, Yuyan; Su, Lixin (Nancy); Wu, Donghui; Yang, Zhifeng
• 署名单位: City University of Hong Kong; Hong Kong Polytechnic University; Chinese University of Hong Kong
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2015.09.003
• 发表日期: 2016
• 关键词: earnings management; discretionary accruals; QUALITY; CONSEQUENCES; COMMITTEE; FIRMS; regulations; connections; performance; LITIGATION

摘要

We identify connected auditors as those who attended the same university as the executives of their clients. Using manually collected data from China, we find that connected auditors are more likely to issue favorable audit opinions, especially for financially distressed clients. Moreover, companies audited by connected auditors report significantly higher discretionary accruals, are more likely to subsequently restate earnings downward, and have lower earnings response coefficients. Lastly, connected auditors earn higher audit fees. Collectively, our evidence suggests the impairment of audit quality when auditors and client executives have school ties and the presence of social reciprocity derived from school ties. (C) 2015 Elsevier B.V. All rights reserved.