The emergence of second-tier auditors in China: analysis of audit fee premium and audit quality

Noel W. Leung, Julia Junxia Liu and Brossa Wong

Asia-Pacific Journal of Accounting & Economics, 2019, vol. 26, issue 6, 684-708

Abstract: Strong government support for the growth of domestic audit firms has contributed to the emergence of second-tier auditors as an alternative to the Big 4 for Chinese listed companies in the post-2007 period. This paper examines audit fee and audit quality differences across the Big 4, second-tier auditors, and other small auditors. Controlling for auditor choice bias, we find the Big 4 earn a fee premium relative to second-tier auditors, although the audit quality between them is indistinguishable. Relative to other small auditors, however, second-tier auditors earn a fee premium that is accompanied by superior audit quality.

Date: 2019
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DOI: 10.1080/16081625.2017.1404920

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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