Goodwill impairment, auditor dismissal and opinion shopping–evidence from China

Cunyu Xing, Huilan Yuwen and Dan Yang

China Journal of Accounting Studies, 2023, vol. 11, issue 4, 864-896

Abstract: Using listed companies from 2010 to 2019 in China, we investigate whether firms engage in opinion shopping activities when firms dismiss the auditors following a goodwill impairment. We find that firms tend to dismiss the incumbent auditors after receiving a goodwill impairment opinion and engage in opinion shopping with their successor auditors. Furthermore, the successor’s auditor quality is similar to the predecessor’s audit quality following a dismissal. Moreover, firms with low-quality internal control system and low analyst coverage level are more motivated to engage in opinion shopping subsequently after receiving a goodwill impairment opinion. Our findings would be of interest to corporate governance activists, auditors, investors and regulators.

Date: 2023
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DOI: 10.1080/21697213.2023.2239672

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