When predecessor and successor accounting firms disclose inconsistent reasons for auditor changes

Junsheng Zhang and Mengyu Zhang

China Journal of Accounting Studies, 2018, vol. 6, issue 2, 159-177

Abstract: Since 2011, China has required that both the predecessor and successor auditors of public companies disclose their reasons for auditor changes. However, we observe that for some companies there are significant discrepancies between the reasons reported by their predecessor auditors and those reported by their successor auditors. This phenomenon has attracted attention from regulators such as the Chinese Institute of Certified Public Accountants (CICPA). Therefore, we conduct an exploratory analysis of this phenomenon. First, the results show that investors consider 35% of the reasons disclosed by the predecessor and successor auditors to be inconsistent; second, if neither the predecessor nor the successor is a Big 4 audit firm, the reasons disclosed by the two firms are more likely to be inconsistent; third, as for the inconsistency between the reasons, investors respond negatively in that they are more prone to sell the stocks; and fourth and finally, the inconsistent reasons disclosed are likely to be followed by poorer financial reporting quality in the next year.

Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/21697213.2018.1522030 (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:rcjaxx:v:6:y:2018:i:2:p:159-177

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rcja20

DOI: 10.1080/21697213.2018.1522030

Access Statistics for this article

China Journal of Accounting Studies is currently edited by Xiaochen Dou

More articles in China Journal of Accounting Studies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().