 Accounting fraud, auditing, and the role of government sanctions in ChinaLing Lei Lisic, Silveri, Sabatino (Dino), Yanheng Song and Kun Wang Journal of Business Research, 2015, vol. 68, issue 6, 1186-1195 Abstract: We use the unique economic, legal, and political landscape of China to examine the impact of auditors on the incidence of accounting fraud. In particular, we examine whether large audit firms reduce the incidence of financial statement fraud in China, an emerging market in which auditors face strong government sanctions but low litigation risk associated with audit failures. We find that companies audited by large audit firms are less likely to commit financial statement fraud. This effect is stronger for regulated industries and for revenue-related frauds. Our results are robust to considering the severity of fraud, excluding firms cross-listing in other jurisdictions, using alternative measures of fraud, accounting for the self-selection of auditors, and controlling for other corporate governance mechanisms. Our results highlight the role of government sanctions in assuring audit quality and have important practical implications to help international audit firms – and businesses more generally – successfully compete in China. Keywords: Auditor size; Financial statement fraud; Government sanction; Corporate governance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:68:y:2015:i:6:p:1186-1195 DOI: 10.1016/j.jbusres.2014.11.013 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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