This study examines the relation between the audit failures of individual auditors and the quality of other audits performed by these same auditors. Employing a Chinese setting where audit reports reveal the identities of engagement auditors, we find that auditors who have performed failed audits also deliver lower-quality audits on other audit engagements, with this “contagion” effect spreading both over time and to other audits performed by these same auditors in the same year. However, we find little evidence that an audit failure also casts doubt on the quality of audits performed by “non-failed” auditors who are same-office colleagues of a “failed” auditor. We further discover that the contagion effect is attenuated for female auditors, auditors holding a master's degree, and auditors with more auditing experience. Our results underscore the usefulness of disclosing the identity and personal characteristics of individual auditors to investors and regulators.

SYNOPSIS Using a sample of Chinese A-share listed firms from 2000 to 2015, we investigate the association between a firm's use of earnings management strategies and the characteristics of its top management team. Our findings suggest that several demographic characteristics (i.e., age, gender, educational level, and financial work experience) of the entire team, as well as of the CEO/CFO and other team members separately, are significantly associated with both accrual-based and real-activities-based earnings management; these, in turn, may affect the quality of the firm's financial reporting. Our results are consistent with the predictions of the upper echelons theory and have implications for various stakeholders in corporate financial reporting, as well as providing insights to those responsible for selecting and developing upper-level executives. JEL Classifications: M40; M41. Data Availability: The data used in this paper are derived from public sources.

We investigate whether management's cognitions, values and perceptions are associated with fraud for 18 863 firm-years for Chinese listed firms from 2000 to 2014. Demographic characteristics of the chief financial officer (CFO) are used as proxies for management's cognitions, values and perceptions. We find that fraudulent financial reporting is higher when CFOs are younger, male, and have lower education backgrounds. An analysis of inflated earnings, fictitious assets, material omissions and other material misstatements provide similar results, with the exception that CFOs with higher education levels are associated with more inflated earnings.

This study investigates the influence of audit committees personal characteristics on the firms earnings management behavior using Chinas publicly traded firms during 2004-2010. Overall, our findings suggest that audit committees several personal characteristics, such as age, gender, education level, and working experience, are associated with earnings management, which in turn may affect the quality of financial reporting. The results are robust after controlling the size, independence, meeting frequency of audit committee, and other firm specific characteristics. The results are consistent with the predictions based on the Upper Echelons Theory. The contributions to the earnings management literature and implications for regulators and investors are also discussed.

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