Legal Liability, Government Intervention, and Auditor Behavior: Evidence from Structural Reform of Audit Firms in China
Legal Liability, Government Intervention, and Auditor Behavior: Evidence from Structural Reform of Audit Firms in China
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DOI：
10.1080/09638180.2015.1100547
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发表时间：
2017-01
影响因子：
3.3
通讯作者：
Kuang He;Xiaofei Pan;G. Tian
中科院分区：
文献类型：
--
作者：
Kuang He;Xiaofei Pan;G. Tian
摘要本文研究了法律的责任对审计质量和审计收费的影响，特别是在政府干预的情况下。自2010年以来，所有中国审计事务所都被要求从有限责任公司（LLC）转变为有限责任合伙公司（LLP），这取消了疏忽审计师的责任风险上限。通过这一自然实验，我们发现：第一，在事务所重组为有限责任合伙后，审计师更有可能（1）发表修改审计意见和持续经营意见，（2）限制客户的盈余管理，（3）收取溢价审计费用，这表明对疏忽的审计师施加无限的法律的责任可以提高审计质量和审计费用。第二，当审计师来自当地审计事务所，客户由地方政府控制时，采用有限责任合伙的效果更为明显。进一步的分析表明，客户的股票价格积极反应的改革事件，这表明有限责任合伙的采用提高了审计的整体价值。总之，我们的实证研究结果与法律的责任能够有效地塑造审计师行为的论点是一致的，在新兴市场中，其他制度机制相对较弱，政府干预很重。
Abstract This paper investigates how legal liability influences audit quality and audit fees, particularly in the presence of government intervention. Since 2010, all Chinese audit firms were required to transform from a structure of limited liability company (LLC) to limited liability partnership (LLP), which removes the cap on the liability exposure of negligent auditors. By adopting this natural experiment, we document the following findings: first, after audit firms reorganize as LLPs, auditors are more likely to (1) issue modified audit opinions and going-concern opinions, (2) constrain clients’ earnings management, and (3) charge a premium in audit fees, which suggest that exerting unlimited legal liability on negligent auditors improves both audit quality and audit fees. Second, the effect of the LLP adoption is more pronounced when auditors are from local audit firms, and clients are controlled by local governments. Further analyses suggest that the stock prices of clients positively react to the reform event, which indicates that LLP adoption improves the overall value of audits. In summary, our empirical findings are consistent with the argument that legal liability is able to effectively shape auditor behavior in emerging markets where the other institutional mechanisms are relatively weaker and government intervention is heavy.