A continuous relation between audit firm size and audit opinions : evidence from China

Chuntao LI, Frank M. SONG, Man Lai, Sonia WONG

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

Abstract

This study documents a continuous relation between audit firm size and the issuing of modified opinions in China using a panel data set of audit firms and listed firms from 2001 to 2003. The relation is robust after controlling for a set of confounding factors and dealing with endogeneity issues. It is also robust when we exclude audit firms involving foreign partners or private client firms from our sample. Our results indicate that the audit firm size effect suggested in other studies is applicable to audit markets that have not yet been dominated by a few very large audit firms as well as audit markets where client firms are partially state-owned entities.
Original languageEnglish
Pages (from-to)111-127
Number of pages17
JournalInternational Journal of Auditing
Volume12
Issue number2
DOIs
Publication statusPublished - 1 Jul 2008

Fingerprint

Firm size
China
Audit firms
Audit opinion
Audit market
Confounding
Factors
Endogeneity
Panel data

Keywords

  • Audit firm size
  • China's audit market
  • audit opinion
  • audit quality

Cite this

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A continuous relation between audit firm size and audit opinions : evidence from China. / LI, Chuntao; SONG, Frank M.; WONG, Man Lai, Sonia.

In: International Journal of Auditing, Vol. 12, No. 2, 01.07.2008, p. 111-127.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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AB - This study documents a continuous relation between audit firm size and the issuing of modified opinions in China using a panel data set of audit firms and listed firms from 2001 to 2003. The relation is robust after controlling for a set of confounding factors and dealing with endogeneity issues. It is also robust when we exclude audit firms involving foreign partners or private client firms from our sample. Our results indicate that the audit firm size effect suggested in other studies is applicable to audit markets that have not yet been dominated by a few very large audit firms as well as audit markets where client firms are partially state-owned entities.

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