Regulatory investigations, media coverage, and audit opinions

Xuelian Li, Liang Dong, Hung Wan Kot and Ming Liu

Journal of International Accounting, Auditing and Taxation, 2024, vol. 54, issue C

Abstract: After an investigation of an audit engagement is announced, does media coverage of the investigation affect the involved individual auditor’s behaviors in his or her other non-investigated engagements? We examine this question using a sample of Chinese firms. We find that an individual auditor is more likely to issue modified audit opinions in non-investigated engagements if the investigation attracts a high level of media coverage. This augmenting effect of media coverage exists only when the non-investigated firm has an opaque information environment or a relatively high level of earnings management, when the individual auditor is the review auditor or a non-busy auditor, and when the news comes from an opinion leader. Our results suggest that the media can play an effective role in broadening the sphere of influence of regulatory actions.

Keywords: Audit opinion; Individual auditor; Media coverage; Regulatory investigation; Spillover effect (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jiaata:v:54:y:2024:i:c:s1061951824000028

DOI: 10.1016/j.intaccaudtax.2024.100596

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