Effect of international working experience of individual auditors on audit quality: Evidence from China

Chen, Xiaolin; Dai, Yue; Kong, Dongmin; Tan, Weiqiang

doi:10.1111/jbfa.12257

Cited by 70 publications

(32 citation statements)

References 76 publications

(151 reference statements)

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“…To check the robustness of the results in Table , we rerun model (2) by using performance‐adjusted discretionary accrual ( DA ) as an alternative measure of audit quality (Chen, Dai, Kong, & Tan, ; Ghosh, Marra, & Moon, ; Knechel, Sharma, & Sharma, ; Kothari, Leone, & Wasley, ). Table reports the empirical results.…”

Section: Robustness Tests and Additional Testsmentioning

confidence: 99%

International evidence on economic policy uncertainty and asymmetric adjustment of audit pricing: Big 4 versus non‐big 4 auditors

Zhang

Tong

et al. 2018

Business Fin & Account

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By investigating the association between economic policy uncertainty and audit fees using data from eight countries, this study examines whether and how Big 4 auditors reinforce their advantages over non-Big 4 auditors through audit pricing. We find that both Big 4 and non-Big 4 auditors reduce their audit fees when economic policy uncertainty increases. However, while non-Big 4 auditors adjust audit pricing asymmetrically as economic policy uncertainty changes, i.e., the magnitude of decline in audit fees when economic policy uncertainty increases exceeds the magnitude of rise when economic policy uncertainty decreases, Big 4 auditors regulate their audit pricing in a symmetric manner. Further analyses reveal that: (1) the asymmetric pricing of non-Big 4 auditors mainly exists in countries where Big 4 auditors have dominant market share, (2) Big 4 auditors provide higher-quality audits when economic policy uncertainty increases and (3) many firms in better financial condition turn to Big 4 auditors during uncertain years. Our findings suggest that the symmetric audit pricing helps Big 4 auditors maintain a favorable position in the audit market.

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Section: Robustness Tests and Additional Testsmentioning

confidence: 99%

International evidence on economic policy uncertainty and asymmetric adjustment of audit pricing: Big 4 versus non‐big 4 auditors

Zhang

Tong

et al. 2018

Business Fin & Account

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“…() documents that firm performance increases after firms hire directors with foreign experience and identify the channels through which the emigration of talent may lead to a brain gain. Chen, Dai, Kong, and Tan () proves that international working experience auditors can significantly improve their audit quality. Therefore, the existing literature of studying the China labor market only focuses on special programs, and the data they use are not nationwide.…”

Section: Literature Reviewmentioning

confidence: 97%

Does a foreign degree pay? The return to foreign education in China

Guo

Zhang

2018

Review Development Economics

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A large body of literature is devoted to estimating causal effects of schooling; however, few studies have addressed the returns on education overseas. In this paper, we focus on the causal impact of holding a foreign education degree on one's performance in the homeland labor market in the context of China, the world's leading source of students pursuing education overseas. To address the issue of endogeneity, we construct an instrumental variable based on the exchange rate when the individual is about to make further education plans to isolate the arguably exogenous cost‐side shocks to one's education decision. Utilizing data from the China Household Financial Survey, we find that holding a foreign education degree has no effect on one's propensity to join the labor market but leads to a 108.95% increase in one's wage upon employment. Moreover, such effects display significant heterogeneity among returnees regarding their background. Specifically, returnees earn less if they went abroad after China joined the WTO, work in public sectors or have rich family resources.

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“…Consequently, auditors' adequate knowledge and abilities are important determinants to ensure audit quality. Foreign experience can effectively help signing auditors learn advanced audit knowledge and practices [54], thereby enabling signing auditors to make more accurate judgments in the audit process and timely discover client firms' earnings manipulation. Moreover, the high-quality education obtained in developed countries or regions can help signing auditors improve their cognitive ability and information processing ability [55,56].…”

Section: Signing Auditors' Foreign Experience and Debt Financing Costsmentioning

confidence: 99%

Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies

Hou

Liao²,

Liu

et al. 2019

Sustainability

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This study investigates whether signing auditors with foreign experience influence debt financing costs. Using a sample of Chinese listed firms for the period of 2001–2016, this study hand-collects the information of signing auditors’ foreign experience and empirically examines the relationship between signing auditors’ foreign experience and debt financing costs. The empirical results show that signing auditors’ foreign experience is significantly and negatively correlated with debt financing costs, suggesting that signing auditors’ foreign experience improves audit quality, reduces information risk and thereby lowers the cost of debt financing. Further analyses show that the negative effect of signing auditors’ foreign experience on the cost of debt financing is more pronounced in audit firms without industry expertise, suggesting that audit firm industry expertise mitigates the negative relationship between signing auditors’ foreign experience and debt financing costs. These results imply that signing auditors who have foreign experience could serve a significant role in debt financing, which would strengthen firms’ sustainability.

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Effect of international working experience of individual auditors on audit quality: Evidence from China

Cited by 70 publications

References 76 publications

International evidence on economic policy uncertainty and asymmetric adjustment of audit pricing: Big 4 versus non‐big 4 auditors

International evidence on economic policy uncertainty and asymmetric adjustment of audit pricing: Big 4 versus non‐big 4 auditors

Does a foreign degree pay? The return to foreign education in China

Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies

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