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

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

55 Scopus Citations
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Author(s)

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Detail(s)

Original languageEnglish
Pages (from-to)506-525
Journal / PublicationJournal of Accounting and Economics
Volume61
Issue number2-3
Online published28 Sep 2015
Publication statusPublished - Apr 2016

Abstract

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.

Research Area(s)

  • School tie, social network, audit quality, audit fee

Bibliographic Note

Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).