Does joining global accounting firm networks and associations affect audit quality and audit pricing? Evidence from China

Wei Li, Huilong Liu and Xizi Wang

Accounting and Business Research, 2021, vol. 51, issue 6-7, 677-706

Abstract: This study investigates the impact of accounting firms joining global accounting firm networks and associations (AF N&As) on audit quality and audit pricing in China. We find that after their accounting firms join global AF N&As, client firms’ accrual-based earnings management is reduced. However, we find no evidence that audit fees are significantly affected. Cross-sectional analysis suggests that improvements in audit quality resulting from accounting firms joining global AF N&As are more pronounced when auditors have less audit experience, clients have more subsidiaries or auditor tenure is shorter. Additional tests suggest that joining AF N&As reduces the likelihood of accounting firms being dismissed by clients and increases the market share of the accounting firms.

Date: 2021
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DOI: 10.1080/00014788.2020.1824115

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