Increasing auditors' competence : the impact of the ST regulation of the CSRC

This paper examines the competence and independence of Chinese auditors. I find significant positive correlation between the modified audit opinions (MAOs) of China A-share companies from 2002 to 2011 and parameters of the clients' company-level control risks, auditor changes, and relative client importance. The evidence indicates that Chinese auditors generally demonstrate competence and independence. I argue that with the "Special Treatment" (ST) regulation, the audit quality of Chinese auditors remains satisfactory; without the ST regulation, the audit quality of Chinese auditors deteriorates. I use the regression results to substantiate that the audit failures of cross-listed Chinese companies occur because of the unavailability of the ST regulation, since the ST regulation has helped to improve the competence of auditors in China. Finally, I analyze the audit quality of "Big Four" affiliate companies in China, and find that the "Big Four" in China do not exhibit higher audit quality compared to local Chinese auditing firms. In fact, the quality of the "Big Four" auditing firms equals that of their non-"Big Four" peers..

Department dc:contributor.department

Sloan School of Management.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2013

Author dc:creator

• Shi, Yanting, S.M. Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• S.P. Kothari.

• Sloan School of Management.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/80682

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/80682