Do school ties between auditors and client executives influence audit outcomes

By Yuyan Guan, Lixin (Nancy) Su, Donghui Wu, Zhifeng Yang. 2016

337 citations recorded by the source corpus.

We identify connected auditors as those who attended the same university as the executives of their clients. Using manually collected data from China, we find that connected auditors are more likely to issue favorable audit opinions, especially for financially distressed clients. Moreover, companies audited by connected auditors report significantly higher discretionary accruals, are more likely to subsequently restate earnings downward, and have lower earnings response coefficients. Lastly, connected auditors earn higher audit fees. Collectively, our evidence suggests the impairment of audit quality when auditors and client executives have school ties and the presence of social reciprocity derived from school ties.

Subfields: Accounting, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/e751bb4af94e73f35ed1562ad49deae5cfdbdd84

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Oliver M. Rui
2. Xianjie He
3. Donghui Wu
4. Jeffrey A. Pittman
5. Clive Lennox
6. Xing-qiang Du
7. Omrane Guedhami
8. Gary Gang Tian

In Sociology and Political Science

1. Oliver M. Rui
2. Jeffrey A. Pittman
3. Donghui Wu

Citations in the corpus

• Do Social Ties between External Auditors and Audit Committee Members Affect Audit Quality (2016, background): “In all estimations, we control for the school ties between engagement auditors and firms’ top managers and other board directors given that Kwon and Yi (2012) and Guan et al. (2014) report that these social ties affect audit quality.”