Does CEO–Auditor Dialect Connectedness Trigger Audit Opinion Shopping? Evidence from China

Xingqiang Du (), Liang Xiao () and Yingjie Du ()
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Xingqiang Du: Xiamen University
Liang Xiao: Xiamen University
Yingjie Du: Shanghai University

Journal of Business Ethics, 2023, vol. 184, issue 2, No 5, 426 pages

Abstract: Abstract Using the original information from the identification cards of CEOs and signing auditors to hand-collect the data on CEO–auditor dialect connectedness (CADC), we examine the effect of CADC on audit opinion shopping (AOS), and further investigate the moderating effect of auditor reputation. Using a sample of Chinese listed firms during the period of 2007–2019, our findings reveal that the likelihood of AOS is significantly higher for firms with CADC than for their counterparts. This finding suggests that CADC impairs auditor independence and triggers AOS. Moreover, the effect of CADC on AOS is less pronounced for BIG10-audited firms than for non-BIG10-audited firms, implying that auditor reputation attenuates the relation between CADC and AOS. Furthermore, the above findings are robust to alternative proxies for CADC and AOS, and our conclusions are still valid after using the Heckman two-stage regressions, the propensity score matching approach, the change model method and the regression discontinuity design to control for the endogeneity issue. Lastly, the impact of CADC on AOS stands only for engagement auditors, but not for review auditors. Overall, our study enriches the existing literature on AOS and auditor independence.

Keywords: Audit opinion shopping (AOS); CEO–auditor dialect connectedness (CADC); BIG10 auditors; Social identity theory (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10551-022-05126-w

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