The Effect of Guanxi on Audit Quality in China

Abstract

guanxi , auditor independence, corporate governance, state ownership, business ethics, China,

Chief financial officer demographic characteristics and fraudulent financial reporting in China

“…Prior studies have documented that many differences exist between stateowned companies and nonstate-owned companies, so we include SOE as a control variable (Liu et al, 2011). We also include G_INDEX, measured as a corporate governance index developed by Nankai University Corporate Governance Center.…”

Political connections, fees paid to auditors and auditor independence in Malaysia: evidence from going concern audit opinions

“…They find that local auditors, who have greater economic dependence on local clients and are subject to more political influence from local governments than non-local auditors, are inclined to report favourably on local government owned companies to mitigate probable economic losses. Liu et al (2011) argued that by means of state ownership and their intervention, firms receiving qualified audit opinions could still get a reversal of audit opinion due to government pressure upon the auditing firms. Based on two types of Guanxi; firm level connections derived from state ownership and personal connections derived from management affiliations with external auditors, they find Guanxi increases the probability of the firms receiving clean audit opinions.…”

“…The first element is the political interest itself as highlighted by Chan et al (2006) and Gul et al (2007) as the auditors could have detected irregularities but do not report the incidences to avoid losses and to protect public interest (Wang et al, 2008;Liu et al, 2011). The first element is the political interest itself as highlighted by Chan et al (2006) and Gul et al (2007) as the auditors could have detected irregularities but do not report the incidences to avoid losses and to protect public interest (Wang et al, 2008;Liu et al, 2011).…”

“…The second element is the prospect or possibility of government bailout or government intervention (Liu et al, 2011). This argument is extended by Wang et al (2008) and Liu et al (2011) which argue that since these connected firms will be bailed out in the events of failure, and thus require no indicator of financial distress, the auditor might not perform accordingly and thus undermine their independence. This argument is extended by Wang et al (2008) and Liu et al (2011) which argue that since these connected firms will be bailed out in the events of failure, and thus require no indicator of financial distress, the auditor might not perform accordingly and thus undermine their independence.…”

Securities Law Violation and Reputation Loss in the Chinese Capital Market

“…state ownership and local government intervention) on reputational sanctions. Existing studies have examined the role of the government on the implementation of governance in the judicial process (Firth et al, 2011b); on the likelihood of regulatory enforcement actions (Hou & Moore, 2010;Liebman & Milhaupt, 2008); and on auditor independence (Liu et al, 2011).…”