Department of Finance and Decision Sciences
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.
audit quality, auditor working experience, China, individual auditor, international working experience
Source Publication Title
Journal of Business Finance and Accounting
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
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.
Link to Publisher's Edition
Chen, X., Dai, Y., Kong, D., & Tan, W. (2017). Effect of international working experience of individual auditors on audit quality: Evidence from China. Journal of Business Finance and Accounting, 44 (7-8), 1073-1108. https://doi.org/10.1111/jbfa.12257