Determinants and Economic Consequences of Signing Auditor Turnover: A Large-Scale Study from China REPORT

Juan Mao and Baolei Qi
Additional contact information
Juan Mao: Department of Accounting, UTSA
Baolei Qi: Xi’an Jiaotong University

Working Papers from College of Business, University of Texas at San Antonio

Abstract: This study investigates why auditors leave one audit firm (and bring their clients) to another and the consequences of such turnover. Using a Chinese sample of 470 auditor-years with turnovers and 7,485 auditor-years without such turnovers from 2001 to 2014, we find that auditors’ professional competency is positively associated with a departure decision in additional to their demographics. Specifically, younger auditors, auditors who are industry specialists, and auditors who audit more clients and have better education background, are more likely to move, suggesting that “rising stars” in the accounting industry are more likely to move from one audit firm to another. However, female auditors, older auditors, and auditors with established status in the current audit firm are less likely to do so. Interestingly, Big 4 signing auditors in China are less likely to move relative to non-Big 4 auditors. We also find that auditors with lower audit quality are less likely to move from one audit firm to another, suggesting that the job market is penalizing auditors for bad quality audits. In terms of consequences, we find that the audit firm is more likely to lose clients whose incumbent auditor moves to another audit firm and it tends to lower audit fees for clients that stay with the audit firm, assign better auditors to them, and treat them more leniently. Our study provides insights that should be of interest to the audit profession, audit firms, and regulators.

Keywords: auditor turnover; audit partners; individual auditors; audit fees; audit quality; audit switch (search for similar items in EconPapers)
JEL-codes: E24 M42 O15 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2017-01-09
New Economics Papers: this item is included in nep-acc, nep-bec, nep-cna and nep-mac
References: Add references at CitEc
Citations:

Published in Review of Economics, March 1999, pages 1-23

Downloads: (external link)
http://interim.business.utsa.edu/wps/acc/0001ACC-949-2017.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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:tsa:wpaper:0138acc

Access Statistics for this paper

More papers in Working Papers from College of Business, University of Texas at San Antonio Contact information at EDIRC.
Bibliographic data for series maintained by Wendy Frost ().