This paper focuses on the reform of accounting standards in China in 2007 and investigates its impact on equilibrium pricing in the audit market. We find that the concentration of the audit market and the probability ...This paper focuses on the reform of accounting standards in China in 2007 and investigates its impact on equilibrium pricing in the audit market. We find that the concentration of the audit market and the probability of issuing modified audit opinions do not significantly change, but that audit fees increase significantly after the adoption of the new accounting standards in China. Deeper analysis suggests that(1) the implementation of the new IFRS-based Chinese Accounting Standards(CASs) has increased the market risk faced by listed firms and thus auditors' expected audit risk, causing an increase in audit fees,and(2) the degree of the increase in audit fees is positively related to the adjusted difference between net income according to the old CAS before2007 and the new CAS after 2007. We thus conclude that the reform has had a significant impact on audit pricing in China.展开更多
We examine whether supply shocks in the audit partner labor market induce clients to switch audit partners.We argue that audit partners in their early careers(i.e.,junior partners)charge low audit fees to attract clie...We examine whether supply shocks in the audit partner labor market induce clients to switch audit partners.We argue that audit partners in their early careers(i.e.,junior partners)charge low audit fees to attract clients,which induces client firms to switch from senior partners to junior partners when there are more junior partners available.Utilizing the Big4 localization policy,we find that Big4 clients are more likely to replace senior auditors with junior auditors to cut costs after the policy.Furthermore,the results are mainly driven by clients who are charged high fees.Our empirical evidence enriches the understanding of auditor choice determinants and informs the ongoing debates surrounding new regulations for Big4 firms in China.展开更多
文摘This paper focuses on the reform of accounting standards in China in 2007 and investigates its impact on equilibrium pricing in the audit market. We find that the concentration of the audit market and the probability of issuing modified audit opinions do not significantly change, but that audit fees increase significantly after the adoption of the new accounting standards in China. Deeper analysis suggests that(1) the implementation of the new IFRS-based Chinese Accounting Standards(CASs) has increased the market risk faced by listed firms and thus auditors' expected audit risk, causing an increase in audit fees,and(2) the degree of the increase in audit fees is positively related to the adjusted difference between net income according to the old CAS before2007 and the new CAS after 2007. We thus conclude that the reform has had a significant impact on audit pricing in China.
文摘We examine whether supply shocks in the audit partner labor market induce clients to switch audit partners.We argue that audit partners in their early careers(i.e.,junior partners)charge low audit fees to attract clients,which induces client firms to switch from senior partners to junior partners when there are more junior partners available.Utilizing the Big4 localization policy,we find that Big4 clients are more likely to replace senior auditors with junior auditors to cut costs after the policy.Furthermore,the results are mainly driven by clients who are charged high fees.Our empirical evidence enriches the understanding of auditor choice determinants and informs the ongoing debates surrounding new regulations for Big4 firms in China.
