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

Fung, Simon Yu Kit, Zhou, Gaoguang (Stephen) and Zhu, Xindong (Kevin) 2016, Monitor objectivity with important clients: evidence from auditor opinions around the world, Journal of international business studies, vol. 47, no. 3, pp. 263-294, doi: 10.1057/jibs.2015.22.

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Title Monitor objectivity with important clients: evidence from auditor opinions around the world
Author(s) Fung, Simon Yu KitORCID iD for Fung, Simon Yu Kit
Zhou, Gaoguang (Stephen)
Zhu, Xindong (Kevin)
Journal name Journal of international business studies
Volume number 47
Issue number 3
Start page 263
End page 294
Total pages 32
Publisher Springer
Place of publication London, Eng.
Publication date 2016-04
ISSN 0047-2506
Keyword(s) multiple regression analysis
institutional theory
monitor objectivity
multinational corporations (MNCs) and enterprises (MNEs)
Summary 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.
Language eng
DOI 10.1057/jibs.2015.22
Field of Research 150102 Auditing and Accountability
1503 Business And Management
1505 Marketing
1402 Applied Economics
Socio Economic Objective 900201 Administration and Business Support Services
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2016, Academy of International Business
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Document type: Journal Article
Collections: Faculty of Business and Law
Department of Accounting
2018 ERA Submission
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