Do social ties between two signatory auditors affect audit quality and firm value?

Xinxian Chen, Jean Jinghan Chen and Jason Zezhong Xiao

Accounting and Business Research, 2025, vol. 55, issue 1, 69-104

Abstract: We explore the effects of social ties (including alumni relations, regional connections and employment affiliation) between the two signatory auditors (engagement and review auditors) on audit quality in China. We find that client firms with socially connected auditors have lower audit quality. The negative effect is more pronounced when the two signatory auditors are partners in their audit firms or when financial irregularities exist in their client firms. Conversely, this adverse effect is alleviated if the two auditors have attended elite schools or work for one of the Big 4 audit firms. We further find that social ties between the two auditors is negatively associated with firm value through impaired market confidence, while this negative relationship can be partially explained by impaired audit quality. Overall, our results indicate that the costs of the two signatory auditors’ social ties outweigh their benefits.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00014788.2024.2306531 (text/html)
Access to full text is restricted to subscribers.

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:taf:acctbr:v:55:y:2025:i:1:p:69-104

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RABR20

DOI: 10.1080/00014788.2024.2306531

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
Bibliographic data for series maintained by Chris Longhurst ().