Increasing auditors' competence : the impact of the ST regulation of the CSRC

[摘要] This paper examines the competence and independence of Chinese auditors. I find significant positive correlation between the modified audit opinions (MAOs) of China A-share companies from 2002 to 2011 and parameters of the clients;; company-level control risks, auditor changes, and relative client importance. The evidence indicates that Chinese auditors generally demonstrate competence and independence. I argue that with the ;;Special Treatment;; (ST) regulation, the audit quality of Chinese auditors remains satisfactory; without the ST regulation, the audit quality of Chinese auditors deteriorates. I use the regression results to substantiate that the audit failures of cross-listed Chinese companies occur because of the unavailability of the ST regulation, since the ST regulation has helped to improve the competence of auditors in China. Finally, I analyze the audit quality of ;;Big Four;; affiliate companies in China, and find that the ;;Big Four;; in China do not exhibit higher audit quality compared to local Chinese auditing firms. In fact, the quality of the ;;Big Four;; auditing firms equals that of their non-;;Big Four;; peers..

[发布机构] Massachusetts Institute of Technology