Effect of International Working Experience of Individual Auditors on Audit Quality: Evidence from China

36 Pages Posted: 3 Aug 2017

See all articles by Xiaolin Chen

Xiaolin Chen

Jiujiang University

Yunhao Dai

Huazhong University of Science and Technology (Formerly Tongi Medical University)

Dongmin Kong

Zhongnan University of Economics and Law

Weiqiang Tan

Hong Kong Baptist University

Multiple version iconThere are 2 versions of this paper

Date Written: July/August 2017

Abstract

This paper investigates the effects of auditors with international working experience on audit quality in emerging markets. Such auditors are associated with better audit quality, a pattern that is further supported by an examination based on a propensity score matching sample that controls for endogeneity. Chief financial officers with international experience are more conservative in the client company of their auditors who have international working experience. Further, reviewer partners with international working experience provide better audit quality in terms of low accruals, less below‐the‐line items, and less audit reporting aggressiveness, while engagement partners with international working experience require high audit fees. Moreover, financial reports signed by auditors with international working experience significantly increase analyst forecast accuracy and decrease analyst forecast dispersion. Our results are robust to different specifications and alternative measures. Overall, this paper highlights the importance of human capital and provides direct evidence on how auditors with international working experience use their knowledge and audit skills in emerging markets.

Keywords: international working experience, individual auditor, auditor working experience, audit quality, China

Suggested Citation

Chen, Xiaolin and Dai, Yunhao and Kong, Dongmin and Tan, Weiqiang, Effect of International Working Experience of Individual Auditors on Audit Quality: Evidence from China (July/August 2017). Journal of Business Finance & Accounting, Vol. 44, Issue 7-8, pp. 1073-1108, 2017. Available at SSRN: https://ssrn.com/abstract=3012856 or http://dx.doi.org/10.1111/jbfa.12257

Xiaolin Chen (Contact Author)

Jiujiang University ( email )

Lufeng Rd, Xunyang Qu
Jiujiang Shi, Jiangxi Sheng
Jiujiang, Jiangxi 332000
China

Yunhao Dai

Huazhong University of Science and Technology (Formerly Tongi Medical University) ( email )

1037 Luoyu Rd
Wuhan, Hubei 430074
China

Dongmin Kong

Zhongnan University of Economics and Law ( email )

No.143, Wuluo Road
Wuhan, Hubei 430073
China

Weiqiang Tan

Hong Kong Baptist University ( email )

Dept of FDS, HK Baptist U
Kowloon, AK 99999
Hong Kong

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