Do companies try to conceal financial misstatements through auditor shopping?

Singer, Zvi; Zhang, Jing

doi:10.1111/jbfa.12562

Cited by 6 publications

(3 citation statements)

References 76 publications

(122 reference statements)

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“…According to signaling theory, under information asymmetry, one side has no means of knowing the actual value of the other side (Reuer et al., 2012), so the side with the information advantage tells the side with the information disadvantage its value by emitting a signal (Bergh et al., 2014; Taj, 2016). An unqualified audit opinion is one such reliable signal that conveys to stakeholders, for example, that accounting information is of good quality and internal controls are sound (Lin & Wang, 2022; Singer & Zhang, 2021). An unqualified audit opinion can help these international enterprises demonstrate an excellent corporate image to the public, but it also helps to gain investors’ trust and obtain more financing (Chung & Kim, 2022; Lu, 2006).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…Once an accounting firm has secured an audit engagement at a low price, it may reduce the necessary audit procedures and the input of audit resources to compensate for the undercharging of audit fees (Chen et al., 2016). Also, accounting firms would collude with auditees to prevent low‐quality audits from being detected by outsiders (Singer & Zhang, 2021), which eventually results in audit opinion shopping.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

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Retracted: International expansion and audit opinion shopping: A signaling perspective

Ding

2024

J Corp Accounting Finance

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Opinion shopping is an essential indication of audit collusion. Hence, it is crucial to explore the driving factors of audit uopinion shopping to better control and address this issue. Drawing upon signaling theory, this paper explores the relationship between international expansion and audit opinion shopping and the moderating roles of internal control quality and auditors’ quality. We find that the higher the level of international expansion of an enterprise, the greater the likelihood of audit opinion shopping. Furthermore, we also find that high internal control quality and high auditor quality can weaken the positive relationship between international expansion and audit opinion shopping. Besides, heterogeneity analysis shows that the impact of international expansion on audit opinion shopping is more pronounced in non‐SOEs and firms which stay in the growth and maturity stage. This paper contributes to the antecedent research of audit opinion shopping and exposes the possible “dark side” of international expansion. Finally, this study may provide practical implications to help the authorities better regulate internationalized enterprises as well as contribute to the healthy development of the auditing market.

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Section: Hypothesis Developmentmentioning

confidence: 99%

Section: Hypothesis Developmentmentioning

confidence: 99%

Retracted: International expansion and audit opinion shopping: A signaling perspective

Ding

2024

J Corp Accounting Finance

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“…If the client's country has a stronger culture of confidentiality, the auditor will be more likely to issue an MAO [39]. Investor investment emotions [40] can promote audit opinion purchases, while effective monitoring can discourage them [41].…”

Section: Research On the Factors Influencing Audit Opinion Decisionsmentioning

confidence: 99%

How Does a Company’s ESG Performance Affect the Issuance of an Audit Opinion? The Moderating Role of Auditor Experience

Wang

Song

Sun

2023

IJERPH

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Green economic development is a new growth point for China’s economy. The reduction in environmental pollution and the practice of social responsibility are strongly advocated by society. ESG (environment, society, governance) is a new concept considering how companies achieve sustainable development. Do auditors pay attention to corporate ESG when making opinion decisions? This paper examines how ESG performance affects audit opinion decisions. The results show the following: (1) The better the ESG performance is, the lower the probability of a modified audit opinion on the part of the auditor will be. (2) Consideration of the auditor experience indicates that auditors who lack experience rely more heavily on information about a corporate ESG performance to make their opinion decisions. (3) The mechanism test demonstrated that a sound ESG performance improves the quality of its financial reporting, which, in turn, reduces the probability of the auditor issuing a modified audit opinion. These conclusions remain robust after considering a number of tests, such as changing variable measures and endogeneity issues. This research expands the study of the economic consequences of ESG from an audit perspective, providing new evidence regarding the importance that corporate management places on ESG performance and how market intermediaries use ESG information.

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More than solely reactive: Audit committee director departures as anticipatory actions in financial misstatements

Liu,

Huang,

Huang

2024

Business Fin & Account

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This study investigates the impact of financial misstatements on audit committee director departures, focusing on anticipatory and reactive actions. By analyzing data from restating and non‐restating firms between 2004 and 2020, we categorize the misstatement process into pre‐occurrence, occurrence, investigation, and post‐announcement periods. Our findings reveal that audit committee directors in restating firms are significantly more likely to depart in all four periods, compared with their counterparts in non‐restating firms. We further explore how the likelihood of departure is influenced by directors’ characteristics, including financial expertise, gender, busyness, tenure, and age. The results suggest that financial misstatements are not merely reactionary events that prompt director departures but also serve as anticipatory signals leading to proactive exits before issues become public. This study provides valuable insights for financial statement users, boards of directors, and governance activists.

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Do companies try to conceal financial misstatements through auditor shopping?

Cited by 6 publications

References 76 publications

Retracted: International expansion and audit opinion shopping: A signaling perspective

Retracted: International expansion and audit opinion shopping: A signaling perspective

How Does a Company’s ESG Performance Affect the Issuance of an Audit Opinion? The Moderating Role of Auditor Experience

More than solely reactive: Audit committee director departures as anticipatory actions in financial misstatements

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