Document Type

Journal Article

Department/Unit

Department of Finance and Decision Sciences

Language

English

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

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

Publication Date

5-29-2017

Source Publication Title

Journal of Business Finance and Accounting

Volume

44

Issue

7-8

Start Page

1073

End Page

1108

Publisher

Wiley

Peer Reviewed

1

Copyright

This is the peer reviewed version of the following article: Chen X, Dai Y, Kong D, Tan W. Effect of international working experience of individual auditors on audit quality: Evidence from China. J Bus Fin Acc. 2017;44:1073–1108. https://doi.org/10.1111/jbfa.12257., which has been published in final form at http://dx.doi.org/10.1111/jbfa.12257. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving

Funder

Chen acknowledges financial support from the National Natural Science Foundation of China (Grant No. 71262013). Dai acknowledges financial support from the China Postdoctoral Science Foundation (Grant No. 2016M592322). Kong is grateful for the financial support from the National Natural Science Foundation of China (Grant No.71372130; 71173078). Tan acknowledges financial support from the Faculty Research Grant of Hong Kong Baptist University.

DOI

10.1111/jbfa.12257

Link to Publisher's Edition

http://dx.doi.org/10.1111/jbfa.12257

ISSN (print)

0306686X

ISSN (electronic)

14685957

Available for download on Saturday, June 01, 2019

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