High-speed railways, audit partner changes across audit offices and audit quality: Evidence from China

K. Hung Chan, Qiliang Liu, Phyllis Lai Lan Mo and Li Tian

The British Accounting Review, 2025, vol. 57, issue 3

Abstract: The development of high-speed railways (HSRs) has significant regional economic and social implications. We study a micro externality of such development, namely the impact of HSRs on audit firms' human resource allocation and audit quality. Specifically, we investigate the relationship between the availability of HSRs and audit partner changes across audit offices in China which involves a simultaneous change in audit partner and audit office to reallocate human resources. We find that the advent of HSRs between clients and audit offices increases the likelihood of audit partner changes across audit offices especially for predecessor audit offices with severe human resource constraints due partly to the mandatory auditor rotation requirement. Such audit partner changes across audit offices most likely are reciprocal over time, occur within the optimal HSR transportation interval and can significantly improve audit quality in terms of reducing excessive financing reporting discretions, misstatements and regulatory sanctions, but exert no effect on audit fees. Our study has implications for audit firms’ human resource management in light of infrastructure improvements and for audit policy makers to evaluate the standards for audit partner rotations.

Keywords: Audit human resource management; Audit offices; Audit partner changes; Audit quality; High-speed railways (HSRs); Infrastructure improvements (search for similar items in EconPapers)
JEL-codes: G38 M12 M49 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:57:y:2025:i:3:s0890838924002865

DOI: 10.1016/j.bar.2024.101506

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