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Conference Paper: Auditor-client bonding and audit quality: partner-level evidence

TitleAuditor-client bonding and audit quality: partner-level evidence
Authors
KeywordsAuditor-client bonding
Audit quality
Client following behavior
Bargaining
Issue Date2009
PublisherAmerican Accounting Association.
Citation
Annual Meeting of the American Accounting Association (AAA) and Conference on Teaching and Learning in Accounting, New York, N.Y., 1-5 August 2009. How to Cite?
AbstractIn this study, we argue that an increased economic bonding may develop between an audit partner and the clients when the auditor switches to a new audit firm because the auditor’s incremental payoff expected from switching to the new firm (e.g., promotion, larger share of firm profits, more perks, and more authority and peer respect) is often enhanced by the number of clients he can bring to the new firm. The auditor and the client can use audit quality as a bargaining tool to divide the incremental payoff generated from the joint auditor-client switch. We thus hypothesize that the turnover audit partners treat follower clients more favorably (by making less downward audit adjustments to pre-audit earnings or allowing greater discretionary accruals) than they treat other clients around the joint auditor-client switches. Using the data in China where engagement-specific audit partner information is available, we find evidence that supports our hypothesis under the condition that both of the signing auditors for the follower client switch to the same successor firm (or come from the same predecessor firm). Our partner-level evidence is consistent with the widespread concern that audit quality is lower when there is a greater level of auditor-client economic bonding.
Persistent Identifierhttp://hdl.handle.net/10722/127328

 

DC FieldValueLanguage
dc.contributor.authorChen, CJPen_HK
dc.contributor.authorLiu, Xen_HK
dc.contributor.authorSu, Xen_HK
dc.contributor.authorWu, Xen_HK
dc.date.accessioned2010-10-31T13:19:08Z-
dc.date.available2010-10-31T13:19:08Z-
dc.date.issued2009en_HK
dc.identifier.citationAnnual Meeting of the American Accounting Association (AAA) and Conference on Teaching and Learning in Accounting, New York, N.Y., 1-5 August 2009.en_HK
dc.identifier.urihttp://hdl.handle.net/10722/127328-
dc.description.abstractIn this study, we argue that an increased economic bonding may develop between an audit partner and the clients when the auditor switches to a new audit firm because the auditor’s incremental payoff expected from switching to the new firm (e.g., promotion, larger share of firm profits, more perks, and more authority and peer respect) is often enhanced by the number of clients he can bring to the new firm. The auditor and the client can use audit quality as a bargaining tool to divide the incremental payoff generated from the joint auditor-client switch. We thus hypothesize that the turnover audit partners treat follower clients more favorably (by making less downward audit adjustments to pre-audit earnings or allowing greater discretionary accruals) than they treat other clients around the joint auditor-client switches. Using the data in China where engagement-specific audit partner information is available, we find evidence that supports our hypothesis under the condition that both of the signing auditors for the follower client switch to the same successor firm (or come from the same predecessor firm). Our partner-level evidence is consistent with the widespread concern that audit quality is lower when there is a greater level of auditor-client economic bonding.-
dc.languageengen_HK
dc.publisherAmerican Accounting Association.-
dc.relation.ispartofAnnual Meeting of the American Accounting Association-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectAuditor-client bonding-
dc.subjectAudit quality-
dc.subjectClient following behavior-
dc.subjectBargaining-
dc.titleAuditor-client bonding and audit quality: partner-level evidenceen_HK
dc.typeConference_Paperen_HK
dc.identifier.emailLiu, X: acliu@hku.hken_HK
dc.description.naturepostprint-
dc.identifier.hkuros172491en_HK
dc.description.otherAnnual Meeting of the American Accounting Association (AAA) and Conference on Teaching and Learning in Accounting, New York, N.Y., 1-5 August 2009.-

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