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Conference Paper: Incentives For Auditor Independence: An Analysis Of The Effectiveness Of Formal Sanctions In China

TitleIncentives For Auditor Independence: An Analysis Of The Effectiveness Of Formal Sanctions In China
Authors
KeywordsAuditor independence
formal sanctions
fraudulent financial reporting
modified audit opinions
Issue Date2005
PublisherAmerican Accounting Association.
Citation
American Accounting Association 2005 Annual Meeting, San Francisco, CA, 7-10 August 2005 How to Cite?
AbstractThis study examines the effectiveness of regulatory sanctions as deterrents to auditors' unethical behavior. Although the effectiveness of formal sanctions is crucial for regulators and policy makers, few empirical studies have addressed the issue. In this paper, we provide empirical evidence on the effectiveness of formal sanctions in improving auditors' independence. We hypothesize that sanctioned auditors who were criticized for failure to detect and report financial statement frauds act more independently and conservatively by issuing more modified audit opinions after being sanctioned. Based on the enforcement releases issued by the China Securities Regulatory Commission, we identified 27 sanctioned auditors and a matched sample of non-sanctioned auditors. We found that in general, sanctioned auditors issued less modified audit opinions than non-sanctioned auditors (control group) but issued more modified audit opinions after the enforcement actions than before. Our findings are important for regulators and policy makers in recognizing their efforts in execution of formal sanctions and in encouraging more stringent and frequent checks on auditors.
Persistent Identifierhttp://hdl.handle.net/10722/112384
SSRN

 

DC FieldValueLanguage
dc.contributor.authorFirth, Men_HK
dc.contributor.authorMo, PLLen_HK
dc.contributor.authorWong, RMKen_HK
dc.date.accessioned2010-09-26T03:29:43Z-
dc.date.available2010-09-26T03:29:43Z-
dc.date.issued2005en_HK
dc.identifier.citationAmerican Accounting Association 2005 Annual Meeting, San Francisco, CA, 7-10 August 2005-
dc.identifier.urihttp://hdl.handle.net/10722/112384-
dc.description.abstractThis study examines the effectiveness of regulatory sanctions as deterrents to auditors' unethical behavior. Although the effectiveness of formal sanctions is crucial for regulators and policy makers, few empirical studies have addressed the issue. In this paper, we provide empirical evidence on the effectiveness of formal sanctions in improving auditors' independence. We hypothesize that sanctioned auditors who were criticized for failure to detect and report financial statement frauds act more independently and conservatively by issuing more modified audit opinions after being sanctioned. Based on the enforcement releases issued by the China Securities Regulatory Commission, we identified 27 sanctioned auditors and a matched sample of non-sanctioned auditors. We found that in general, sanctioned auditors issued less modified audit opinions than non-sanctioned auditors (control group) but issued more modified audit opinions after the enforcement actions than before. Our findings are important for regulators and policy makers in recognizing their efforts in execution of formal sanctions and in encouraging more stringent and frequent checks on auditors.-
dc.languageengen_HK
dc.publisherAmerican Accounting Association.en_HK
dc.relation.ispartofAmerican Accounting Association Annual Meetingen_HK
dc.subjectAuditor independence-
dc.subjectformal sanctions-
dc.subjectfraudulent financial reporting-
dc.subjectmodified audit opinions-
dc.titleIncentives For Auditor Independence: An Analysis Of The Effectiveness Of Formal Sanctions In Chinaen_HK
dc.typeConference_Paperen_HK
dc.identifier.emailWong, RMK: raymond@business.hku.hken_HK
dc.identifier.authorityWong, RMK=rp01113en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.2139/ssrn.615902-
dc.identifier.hkuros120230en_HK
dc.identifier.ssrn615902-

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