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Do Audit Clients Successfully Engage in Opinion Shopping? Partner-Level Evidence

Journal of accounting research, 2016-03, Vol.54 (1), p.79-112 [Peer Reviewed Journal]

2016 The Accounting Research Center at the University of Chicago Booth School of Business ;Copyright ©, University of Chicago on behalf of the Accounting Research Center, 2015 ;ISSN: 0021-8456 ;EISSN: 1475-679X ;DOI: 10.1111/1475-679X.12097 ;CODEN: JACRBR

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  • Title:
    Do Audit Clients Successfully Engage in Opinion Shopping? Partner-Level Evidence
  • Author: CHEN, FENG ; PENG, SONGLAN ; XUE, SHUANG ; YANG, ZHIFENG ; YE, FEITENG
  • Subjects: Accounting firms ; audit quality ; Auditing ; Auditors ; Audits ; China ; individual auditor ; M40 ; M41 ; M42 ; opinion shopping ; partner switch ; Shopping ; Studies
  • Is Part Of: Journal of accounting research, 2016-03, Vol.54 (1), p.79-112
  • Description: This study investigates whether companies engage in audit opinion shopping activities by exerting influence over an audit firm's decision to switch the engagement partner ("partner-level opinion shopping") in the Chinese setting, where the identities of engagement partners are publicly disclosed. Adopting the empirical framework developed by Lennox [2000], we show evidence that companies successfully engage in partner-level opinion shopping. Further, partner-level opinion shopping is more likely to be successful if a company is economically important to an audit firm, and it is less likely to be successful if the audit firm is formed as a partnership rather than a corporation. We also find that companies successfully engaging in partner-level opinion shopping exhibit significantly lower earnings quality. Finally, we directly compare audit records between incoming and outgoing partners and find that, for companies that successfully improve audit opinions after partner switching, incoming partners have a significantly higher propensity to issue clean opinions than their outgoing counterparts.
  • Publisher: Chicago: Blackwell Publishing Ltd
  • Language: English
  • Identifier: ISSN: 0021-8456
    EISSN: 1475-679X
    DOI: 10.1111/1475-679X.12097
    CODEN: JACRBR
  • Source: Alma/SFX Local Collection
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