Do Audit Clients Successfully Engage in Opinion Shopping? Partner-Level Evidence

• 成果类型: Article
• 署名作者: Chen, Feng; Peng, Songlan; Xue, Shuang; Yang, Zhifeng; Ye, Feiteng
• 署名单位: University of Toronto; University of Missouri System; University of Missouri Columbia; York University - Canada; Shanghai University of Finance & Economics; City University of Hong Kong; Shanghai Lixin University of Accounting & Finance
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12097
• 发表日期: 2016
• 页码: 79-112
• 关键词: INSTITUTIONAL ENVIRONMENT; earnings management; industry expertise; QUALITY; CHINA; office; TENURE; COSTS; firm

摘要

This study investigates whether companies engage in audit opinion shopping activities by exerting influence over an audit firm's decision to switch the engagement partner (partner-level opinion shopping) in the Chinese setting, where the identities of engagement partners are publicly disclosed. Adopting the empirical framework developed by Lennox [2000], we show evidence that companies successfully engage in partner-level opinion shopping. Further, partner-level opinion shopping is more likely to be successful if a company is economically important to an audit firm, and it is less likely to be successful if the audit firm is formed as a partnership rather than a corporation. We also find that companies successfully engaging in partner-level opinion shopping exhibit significantly lower earnings quality. Finally, we directly compare audit records between incoming and outgoing partners and find that, for companies that successfully improve audit opinions after partner switching, incoming partners have a significantly higher propensity to issue clean opinions than their outgoing counterparts.