Does audit committee heterogeneity matter in auditor selection?

Jingyu Gao, Tian Kong, Yuzhu Yang and Lili Hao

Managerial Auditing Journal, 2025, vol. 40, issue 4, 384-422

Abstract: Purpose - Although various stakeholder groups frequently advocate and call for greater heterogeneity among directors and managers, it remains unknown whether team heterogeneity can be beneficial for audit committee to exercise the auditor selection functions. This study aims to address this question. Design/methodology/approach - Drawing on a sample of domestically listed nonfinancial A-share firms in China from 2008 to 2022, the authors empirically examine whether and how firm’s audit committee heterogeneity associates with the selection of auditors. Findings - Firms with higher levels of audit committee heterogeneity are more likely to be associated with lower-quality auditors. Further examination reveals the mediating role of risk-taking: higher levels of heterogeneity are associated with higher levels of risk-taking, influencing firms to employ lower-quality auditors. Moreover, the authors document that increased audit committee heterogeneity is associated with more audit committee meetings and lower audit efficiency, and that hiring lower-quality auditors can influence the market value of firms with high audit committee heterogeneity. Originality/value - To the best of the authors’ knowledge, this study is the first to examine whether and how audit committee erogeneity associates with the selection of auditors. Moreover, because China is a high-power distance, collectivism-oriented, more relations-based (i.e. guanxi-based) than rules-based society, it is critical to examine the influence of team heterogeneity based on the unique cultural context and transitional nature of China’s business environment.

Keywords: Audit committee heterogeneity; Auditor selection; Risk-taking; Regional culture; Government intervention; G30; M21; J10 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-07-2024-4414

DOI: 10.1108/MAJ-07-2024-4414

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