 Can auditors’ local knowledge compensate for a weaker regulatory oversight for the audit quality of foreign companies?K. Hung Chan, Yingwen Guo and Phyllis Lai Lan Mo Accounting and Business Research, 2021, vol. 51, issue 2, 127-155 Abstract: This study examines whether auditors’ local knowledge of clients can compensate for a weaker regulatory oversight in the audits of foreign companies. Based on a sample of Chinese companies that were listed in the U.S. and after controlling for other factors that may affect audit quality, we find that the audit quality of Hong Kong and Chinese non-Big 4 auditors is comparable to that of U.S. auditors with an affiliate in China and higher than that of U.S. auditors without a Chinese affiliate. Additional analysis indicates that U.S. auditors provide higher audit quality to U.S.-based listed firms than U.S.-listed Chinese firms and the quality difference is reduced for U.S. auditors with a Chinese affiliate. These results indicate that auditors’ local knowledge of foreign clients has a positive effect on audit quality and in certain circumstances, it can compensate for a weaker regulatory oversight in an international setting. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:acctbr:v:51:y:2021:i:2:p:127-155 Ordering information: This journal article can be ordered from DOI: 10.1080/00014788.2020.1780109 Access Statistics for this article Accounting and Business Research is currently edited by Vivien Beattie More articles in Accounting and Business Research from Taylor & Francis Journals |
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