Do Audit Clients Successfully Engage in Opinion Shopping? Partner‐Level Evidence

Chen, Feng; Peng, Songlan; Xue, Shuang; Yang, Zhifeng; Ye, Feiteng

doi:10.1111/1475-679x.12097

Cited by 161 publications

(159 citation statements)

References 64 publications

(142 reference statements)

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“…Approximately 34% of companies reported losses in the earlier year, and if a company experiences a loss in the preceding year then resulted in the incidence of a modified audit opinion. This is consistence with Chen, Peng, Xue, Yang and Ye who found that firms with accounting losses are more probable to receive modified (unfavourable) opinions [14]. This figure is similar to the relationship of average loss and Big 4 auditors in a study conducted in Jordan by Alzoubi.…”

Section: Descriptive Analysissupporting

confidence: 84%

“…Further, the external auditors are anticipated to play a supervising role in safeguarding the credibility of financial reports, limiting the opportunistic earnings management, and decreasing the information asymmetry between managers and external stakeholder [3,[10][11][12]. It is required that audit opinion must convey the level of assurance to financial users the financial statements that accurately and truthfully reproduce a company's underlying fiscal activities [13,14]. Hence, an auditor's report is a potential way to verify the handiness of financial facts [15].…”

Section: Introductionmentioning

confidence: 99%

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Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

Alkilani¹,

Hussin²,

Salim³

2019

IJAFRM

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It is well established that ownership characteristics are impacted by the quality of financial reporting. The purpose of this work is to examine the role of ownership characteristics in minimising the prospect of corporates obtaining a modified audit opinion in Jordan. Three ownership characteristics [family ownership (FAOWN), institutional ownership (INOWN) and foreign ownership (FAOWN)] and modified audit opinion were studied. The study used 117 samples of corporates listed on the Amman Stock Exchange (ASE). Logistic regression was employed to analyse the association between the modified audit opinions as a dependent variable and ownership characteristics as independent variables. Ownership characteristics are anticipated to be more successful in improving the quality of financial statement, and thus, reduce the prospect of firm obtaining a modified audit opinion. The analysed results from 2012 to 2016 periods of these corporates in Jordan showed that FAOWN and FOOWN validated this projection. Interestingly, the effect of family and FOOWN improve the quality of financial statement, thereby, reduce the cases of a modified audit opinion. Additionally, the study could not find any association impact between the INOWN and modified audit opinion.

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Section: Descriptive Analysissupporting

confidence: 84%

Section: Introductionmentioning

confidence: 99%

Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

Alkilani¹,

Hussin²,

Salim³

2019

IJAFRM

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“…Instead, we find that successful partner‐level opinion shopping is equally evident among both genders. While Chen et al () report that successful partner‐level opinion shopping is evident among public Chinese firms, we find evidence of this reporting behavior among both private and public firms.…”

Section: Resultscontrasting

confidence: 67%

The effect of audit partner gender on modified audit opinions

Karjalainen

Niskanen

2018

Int J Auditing

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We examine the effect of audit partner gender on the likelihood of issuing a modified audit opinion (MAO) across conditions in which the issuance of an MAO is warranted and/or that create incentives to report opportunistically at the audit-partner level. We find that, after an audit partner switch, female audit partners are more likely to issue first-time MAOs and MAOs generally and that female audit partners are more persistent in issuing MAOs. However, after correcting for self-selection bias, we do not find an effect on the part of audit partner gender on the likelihood of issuing an MAO in the case of partner-level opinion shopping, subsequently failing firms, or firms that are economically important at the audit-partner level. This stands in contrast with the previous evidence regarding the effect of audit partner gender on going-concern reporting. Overall, our study provides new evidence regarding the conditions that induce female audit partners to report more conservatively compared with male audit partners. The results imply that female audit partners report more conservatively if an MAO was issued in the previous year and if the audit partner has been switched.

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“…The Chinese audit market is marked by ineffective law enforcement and weak investor protection [32] and thus auditors face low litigation risks [33]. As a result, it is usually difficult for Chinese audit firms to achieve consistent audit quality across different signing auditors of the same audit firm because of the weak quality control mechanisms in place, leading to significant heterogeneity in audit quality across signing auditors in China [34]. In addition, China's auditing standards require that signing auditors who administer the audit process sign the audit reports and have responsibility for the audit outcomes [16].…”

Section: Institutional Backgroundmentioning

confidence: 99%

Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies

Hou

Liao²,

Liu

et al. 2019

Sustainability

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This study investigates whether signing auditors with foreign experience influence debt financing costs. Using a sample of Chinese listed firms for the period of 2001–2016, this study hand-collects the information of signing auditors’ foreign experience and empirically examines the relationship between signing auditors’ foreign experience and debt financing costs. The empirical results show that signing auditors’ foreign experience is significantly and negatively correlated with debt financing costs, suggesting that signing auditors’ foreign experience improves audit quality, reduces information risk and thereby lowers the cost of debt financing. Further analyses show that the negative effect of signing auditors’ foreign experience on the cost of debt financing is more pronounced in audit firms without industry expertise, suggesting that audit firm industry expertise mitigates the negative relationship between signing auditors’ foreign experience and debt financing costs. These results imply that signing auditors who have foreign experience could serve a significant role in debt financing, which would strengthen firms’ sustainability.

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Do Audit Clients Successfully Engage in Opinion Shopping? Partner‐Level Evidence

Cited by 161 publications

References 64 publications

Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

The effect of audit partner gender on modified audit opinions

Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies

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