How Auditors Respond to Resignations of Supervisory Board Members

Xinming Liu and Xiaoqiao Zhu

Accounting and Finance, 2025, vol. 65, issue 4, 3310-3346

Abstract: Using manually verified supervisory board (hereafter, SB) resignation data from China spanning the period 2009–2020, our study finds a positive relationship between audit fees and SB resignations. Additionally, the positive relationship between audit fees and SB resignations is amplified when resignations signal a heightened level of monitoring risk, as reflected in the characteristics of the resigning SB members, the successors and the firm. Mechanism analysis supports the Risk Signal Mechanism, highlighting the role of SB members in monitoring and accessing risk‐related information prior to resignations. Lastly, auditors are less likely to issue clean audit opinions following SB resignations.

Date: 2025
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