Audit firm governance of branches and office-level acceptance of initial engagement: Evidence from the CICPA survey data

Chunfei Wang, Xi Wu and Tiebing Zeng

China Journal of Accounting Studies, 2015, vol. 3, issue 4, 277-293

Abstract: This study examines the impact of an audit firm’s governance of branches on the initial engagement acceptance by branches. Using the survey data on audit firms’ governance of branches from the Chinese Institute of Certified Public Accountants (CICPA), we find that, compared with branches that are better governed by the audit firm, weakly-governed branches are more likely to accept initial engagement with a prior-year modified audit opinion. Further, for initial engagements with a prior-year modified audit opinion, the tendency of weakly governed branches to continuously issue a modified audit opinion is weaker than better governed branches. Our evidence is consistent with the notion that an audit firm’s internal governance has a positive effect on the effectiveness of audit firm’s quality control.

Date: 2015
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DOI: 10.1080/21697213.2015.1100088

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