Does International Accounting Network Membership Affect Audit Fees and Audit Quality? Evidence From China
Juan Mao,
Baolei Qi and
Qian Xu
The International Journal of Accounting, 2017, vol. 52, issue 3, 262-278
Abstract:
Regulators suggest that small audit firms join international accounting networks to reduce their resource constraints in serving large clients and providing high-quality service. Bills, Cunningham, and Myers (2016) investigate the issue in the United States and find that both audit fees and quality are higher for members of international accounting networks (i.e., member audit firms). We investigate the effects of network membership on audit fees and quality in China, a relatively weaker institutional environment than the United States. Using data of Chinese listed companies audited by non-Big N audit firms from 2001 to 2010, we find that member audit firms charge 3.9% higher fees than nonmember audit firms, much lower than the 30% fee premiums charged by U.S. member audit firms. We do not find consistent evidence that audit quality is higher for member audit firms. Overall, our results demonstrate that China's weak institutional environment may overwhelm the quality control brought by international accounting networks and that it may weaken or even offset the benefits of audit firms' participation in these networks, resulting in smaller or even no effects of membership on audit fees and quality.
Keywords: International accounting networks; Small audit firms; Weak institutional environment; Audit fees; Audit quality (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0020706317302601
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:52:y:2017:i:3:p:262-278
DOI: 10.1016/j.intacc.2017.07.004
Access Statistics for this article
The International Journal of Accounting is currently edited by A. R. Abdel-Khalik
More articles in The International Journal of Accounting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().