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Auditor disaffiliation program in China and auditor independence

Gul, Ferdinand A, Sami, Heibatollah and Zhou, Haiyan 2009, Auditor disaffiliation program in China and auditor independence, Auditing : a journal of practice & theory, vol. 28, no. 1, pp. 29-51, doi: 10.2308/aud.2009.28.1.29.

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Title Auditor disaffiliation program in China and auditor independence
Author(s) Gul, Ferdinand A
Sami, Heibatollah
Zhou, Haiyan
Journal name Auditing : a journal of practice & theory
Volume number 28
Issue number 1
Start page 29
End page 51
Total pages 23
Publisher American accounting association
Place of publication Sarasota, Fla.
Publication date 2009-05
ISSN 0278-0380
1558-7991
Summary SUMMARY: This study examines whether the disaffiliation program introduced by the Chinese government improved auditor independence and whether auditor quality affects this relationship. Auditor independence is measured in terms of the likelihood of receiving a qualified report and the level of earnings management (measured by noncore operating income). The results show that the likelihood of receiving qualified audit opinions for listed companies significantly increased, and noncore operating earnings significantly decreased, after auditors were disaffiliated. However, companies audited by auditors without any affiliation also showed an increase in the likelihood of receiving qualified opinions and a decrease in noncore operating earnings, possibly because of the increased surveillance by the regulatory bodies that accompanied the act of disaffiliation. The results also show that the association between the disaffiliation program and the likelihood of receiving qualified audit opinions is stronger for small auditors than for large auditors, possibly because of the initial lower audit quality of small auditors. Auditor size, however, did not significantly affect the association between the disaffiliation program and noncore operating earnings.
Language eng
DOI 10.2308/aud.2009.28.1.29
Field of Research 150103 Financial Accounting
150199 Accounting, Auditing and Accountability not elsewhere classified
1501 Accounting, Auditing And Accountability
Socio Economic Objective 970115 Expanding Knowledge in Commerce
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2009, American Accounting Association
Persistent URL http://hdl.handle.net/10536/DRO/DU:30087017

Document type: Journal Article
Collection: Department of Accounting
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