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Monitor objectivity with important clients: Evidence from auditor opinions around the world

Journal of international business studies, 2016-04, Vol.47 (3), p.263-294 [Peer Reviewed Journal]

Copyright © 2016 Academy of International Business ;Academy of International Business 2015 ;Academy of International Business 2016 ;ISSN: 0047-2506 ;EISSN: 1478-6990 ;DOI: 10.1057/jibs.2015.22

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Title:
Monitor objectivity with important clients: Evidence from auditor opinions around the world
Author: Fung, Simon Yu Kit ; Zhou, Gaoguang (Stephen) ; Zhu, Xindong (Kevin)
Subjects: Auditing ; Auditing standards ; Auditor independence ; Auditors ; Audits ; Boards of directors ; Business and Management ; Business audits ; Business entities ; Business Strategy/Leadership ; Certification ; Conflicts of interest ; Corporate profits ; Credibility ; Credit ratings ; Financial audits ; Financial reporting ; Financial statements ; International Business ; International finance ; Investors ; Management ; Management audits ; Objectivity ; Organization ; Rating services ; Reputations ; Tax audits
Is Part Of: Journal of international business studies, 2016-04, Vol.47 (3), p.263-294
Description: We examine whether monitors are likely to compromise their monitoring objectivity in the face of economically important clients in international business settings. In the context of external auditing and assurance services, we measure monitor objectivity by whether auditors are more (or less) likely to issue to their important clients modified audit opinions, that is, audit opinions provided to outside investors about the firm that demotes explicit areas of concern. Using a large cross-country sample, we document that auditors are more likely to issue modified opinions to their economically important clients relative to other clients. Furthermore, we find that this association is stronger (1) for Big N auditors, (2) for multinational audit clients, and (3) in countries with stronger legal regimes. These results suggest that monitors prioritize the protection of their reputation over lucrative economic relationships, and such information certification function is more pronounced for international auditors, multinational client firms, and in strong legal regimes.
Publisher: London: Palgrave Macmillan
Language: English
Identifier: ISSN: 0047-2506
EISSN: 1478-6990
DOI: 10.1057/jibs.2015.22
Source: ProQuest Central

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Monitor objectivity with important clients: Evidence from auditor opinions around the world

Copyright © 2016 Academy of International Business ;Academy of International Business 2015 ;Academy of International Business 2016 ;ISSN: 0047-2506 ;EISSN: 1478-6990 ;DOI: 10.1057/jibs.2015.22

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