There has been a steady growth of goodwill impairments in the Chinese stock market since the adoption of the impairment approach in accounting.The influence of goodwill impairments on a firm’s financial position and ...There has been a steady growth of goodwill impairments in the Chinese stock market since the adoption of the impairment approach in accounting.The influence of goodwill impairments on a firm’s financial position and profitability give reason to doubt its current and future performance.We examine whether auditors,as a crucial external monitor,identify the information risks of goodwill impairments and express their concerns about financial reporting quality in their audit opinions.Using a sample of firms listed on China’s Ashare market from 2007 to 2017,we test the association between goodwill impairments and the type of audit opinion received in the same financial period.Our findings are as follows.First,the probability of receiving a modified opinion increases with the amount of goodwill impairments.Second,the positive association between goodwill impairments and modified audit opinions is driven primarily by earnings management risks.Third,this positive association is more salient when auditors are industry experts and there is no auditor–client mismatch.Fourth,auditors are more sensitive to the amount of goodwill impairments than to their mere existence.Overall,we document that auditors perceive goodwill impairments as a signal of information risks and communicate their concerns to investors to avoid litigation.展开更多
We explore the association between the number of critical audit matters and auditing opinion based on the Chinese capital market data.In addition,we investigate the effect of audit risk on the relationship between the...We explore the association between the number of critical audit matters and auditing opinion based on the Chinese capital market data.In addition,we investigate the effect of audit risk on the relationship between the number of critical audit matters and auditing opinion.Using 6,662 firm-year observations listed in the Chinese capital market from 2017–2019,we find that the number of critical audit matters has significantly positive association with clear audit opinion.Specially,the greater the number of critical audit matters,the more likely getting clear audit opinion.We also find that the audit risk restricts the effect of the critical audit matters on the audit opinion.Lastly,we find that Big4 accounting firms are less likely to be influenced by the number of critical audit matters;the audit complexity restricts the effect of the critical audit matters on the audit opinion;the more board members,the less effect of the number of critical audit matters on the audit opinion.We also use several robustness tests to strengthen the conclusion.Our research may contribute to the understanding of the new audit standard.展开更多
The existing literature on audit opinion shopping provides inconsistent evidence on whether such shopping has any association with abnormal audit fees. In this paper, we hypothesize that firms engage in audit opinion ...The existing literature on audit opinion shopping provides inconsistent evidence on whether such shopping has any association with abnormal audit fees. In this paper, we hypothesize that firms engage in audit opinion shopping and pay an abnormal audit fee only when their degree of accounting quality is low. To examine the issue, we group firms on the basis of their change in return on assets(ROA), and show that abnormal audit fees improve audit opinions only among firms that engage local auditors and have a low degree of ROA, but report a large increase in ROA, especially when the ROA change is the result of abnormal accruals. We find no association between abnormal audit fees and audit opinion improvement for other firms.展开更多
We present a framework and empirical evidence to explain why,on average,11%of listed firms in China received modified audit opinions(MAOs)between 1992 and 2009.We argue that there are two reasons for this phenomenon:s...We present a framework and empirical evidence to explain why,on average,11%of listed firms in China received modified audit opinions(MAOs)between 1992 and 2009.We argue that there are two reasons for this phenomenon:strong earnings management incentives lower firms'financial reporting quality and soft budget constraints weaken the information and governance roles of audit opinions.We find that firms'financial constraints eased after receiving MAOs,which suggests that MAOs have limited economic consequences.Further analysis shows that this phenomenon predominantly exists in government-controlled firms and firms that receive MAOs for the first time.We also find that MAOs have not influenced financial constraints after 2006.Finally,we find that MAOs did not affect borrowing cash flows from banks until 2005,suggesting that MAOs did not start affecting bank financing until that year.We also find that firms receive more related-party financing after receiving MAOs.Our results indicate that a limited effect on bank financing and increased related-party financing reduce the effect of MAOs on financial constraints.展开更多
In response to the recommendation by the American Assembly of Collegiate Schools of Business(AACSB,2002),which urged business schools to embark on interdisciplinary programs to facilitate boundary-spanning teaching an...In response to the recommendation by the American Assembly of Collegiate Schools of Business(AACSB,2002),which urged business schools to embark on interdisciplinary programs to facilitate boundary-spanning teaching and learning,many colleges have conducted one form of curriculum integration or the other.Many of these team-taught course integrations,however,concentrate on core business courses without reaching out to related courses in other disciplines.Moreover,due to some factors,the informational contents of management disclosures in annual reports and audit unqualified opinions may not align with the future viability of an enterprise.Using a“going concern concept”,this paper demonstrates how the addition of economics in business school curriculum integration could produce well-rounded business graduates.Economics concepts could unambiguously support the tests that cast doubts on firms’ability to continue operations.展开更多
The rapid development of non-audit services(NAS)has jeopardized the independence of auditors,which has led many Western countries to enact regulations that restrict the provision of NAS.While in China,NAS have just em...The rapid development of non-audit services(NAS)has jeopardized the independence of auditors,which has led many Western countries to enact regulations that restrict the provision of NAS.While in China,NAS have just emerged,and its development in China is far less mature than in Western countries.The purpose of this paper is to explore whether NAS in China have damaged auditor independence and whether Chinese regulators need to emulate Western countries and strongly limit the provision of NAS.In order to achieve this objective,213 Chinese listed companies are selected in this study.The audit opinions issued by the auditors are used as substitute variables for auditor independence(dependent variables),and the ratio of non-audit service fees to the total of audit service fees and non-audit service fees as a substitute variable for the provision of NAS(independent variable),and meanwhile some suitable control variables are also selected.Analyse these data by building a binary logistic regression model.The results show that there is no evidence in China that NAS can undermine auditor independence and there is no need for China to enact regulations to prohibit the provision of NAS.展开更多
文摘There has been a steady growth of goodwill impairments in the Chinese stock market since the adoption of the impairment approach in accounting.The influence of goodwill impairments on a firm’s financial position and profitability give reason to doubt its current and future performance.We examine whether auditors,as a crucial external monitor,identify the information risks of goodwill impairments and express their concerns about financial reporting quality in their audit opinions.Using a sample of firms listed on China’s Ashare market from 2007 to 2017,we test the association between goodwill impairments and the type of audit opinion received in the same financial period.Our findings are as follows.First,the probability of receiving a modified opinion increases with the amount of goodwill impairments.Second,the positive association between goodwill impairments and modified audit opinions is driven primarily by earnings management risks.Third,this positive association is more salient when auditors are industry experts and there is no auditor–client mismatch.Fourth,auditors are more sensitive to the amount of goodwill impairments than to their mere existence.Overall,we document that auditors perceive goodwill impairments as a signal of information risks and communicate their concerns to investors to avoid litigation.
文摘We explore the association between the number of critical audit matters and auditing opinion based on the Chinese capital market data.In addition,we investigate the effect of audit risk on the relationship between the number of critical audit matters and auditing opinion.Using 6,662 firm-year observations listed in the Chinese capital market from 2017–2019,we find that the number of critical audit matters has significantly positive association with clear audit opinion.Specially,the greater the number of critical audit matters,the more likely getting clear audit opinion.We also find that the audit risk restricts the effect of the critical audit matters on the audit opinion.Lastly,we find that Big4 accounting firms are less likely to be influenced by the number of critical audit matters;the audit complexity restricts the effect of the critical audit matters on the audit opinion;the more board members,the less effect of the number of critical audit matters on the audit opinion.We also use several robustness tests to strengthen the conclusion.Our research may contribute to the understanding of the new audit standard.
文摘The existing literature on audit opinion shopping provides inconsistent evidence on whether such shopping has any association with abnormal audit fees. In this paper, we hypothesize that firms engage in audit opinion shopping and pay an abnormal audit fee only when their degree of accounting quality is low. To examine the issue, we group firms on the basis of their change in return on assets(ROA), and show that abnormal audit fees improve audit opinions only among firms that engage local auditors and have a low degree of ROA, but report a large increase in ROA, especially when the ROA change is the result of abnormal accruals. We find no association between abnormal audit fees and audit opinion improvement for other firms.
基金supported by the National Natural Science Foundation of China(No.71172143)the Major Project of Key Research Institute of Humanities and Social Science of the Ministry of Education,People's Republic of China(No.2009JJD790030)
文摘We present a framework and empirical evidence to explain why,on average,11%of listed firms in China received modified audit opinions(MAOs)between 1992 and 2009.We argue that there are two reasons for this phenomenon:strong earnings management incentives lower firms'financial reporting quality and soft budget constraints weaken the information and governance roles of audit opinions.We find that firms'financial constraints eased after receiving MAOs,which suggests that MAOs have limited economic consequences.Further analysis shows that this phenomenon predominantly exists in government-controlled firms and firms that receive MAOs for the first time.We also find that MAOs have not influenced financial constraints after 2006.Finally,we find that MAOs did not affect borrowing cash flows from banks until 2005,suggesting that MAOs did not start affecting bank financing until that year.We also find that firms receive more related-party financing after receiving MAOs.Our results indicate that a limited effect on bank financing and increased related-party financing reduce the effect of MAOs on financial constraints.
文摘In response to the recommendation by the American Assembly of Collegiate Schools of Business(AACSB,2002),which urged business schools to embark on interdisciplinary programs to facilitate boundary-spanning teaching and learning,many colleges have conducted one form of curriculum integration or the other.Many of these team-taught course integrations,however,concentrate on core business courses without reaching out to related courses in other disciplines.Moreover,due to some factors,the informational contents of management disclosures in annual reports and audit unqualified opinions may not align with the future viability of an enterprise.Using a“going concern concept”,this paper demonstrates how the addition of economics in business school curriculum integration could produce well-rounded business graduates.Economics concepts could unambiguously support the tests that cast doubts on firms’ability to continue operations.
文摘The rapid development of non-audit services(NAS)has jeopardized the independence of auditors,which has led many Western countries to enact regulations that restrict the provision of NAS.While in China,NAS have just emerged,and its development in China is far less mature than in Western countries.The purpose of this paper is to explore whether NAS in China have damaged auditor independence and whether Chinese regulators need to emulate Western countries and strongly limit the provision of NAS.In order to achieve this objective,213 Chinese listed companies are selected in this study.The audit opinions issued by the auditors are used as substitute variables for auditor independence(dependent variables),and the ratio of non-audit service fees to the total of audit service fees and non-audit service fees as a substitute variable for the provision of NAS(independent variable),and meanwhile some suitable control variables are also selected.Analyse these data by building a binary logistic regression model.The results show that there is no evidence in China that NAS can undermine auditor independence and there is no need for China to enact regulations to prohibit the provision of NAS.