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A Continuous Relation between Audit Firm Size and Audit Opinions: Evidence from China
Author(s) -
Li Chuntao,
Song Frank M.,
Wong Sonia M. L.
Publication year - 2008
Publication title -
international journal of auditing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.583
H-Index - 21
eISSN - 1099-1123
pISSN - 1090-6738
DOI - 10.1111/j.1099-1123.2008.00374.x
Subject(s) - audit , accounting , business , endogeneity , joint audit , audit evidence , sample (material) , internal audit , economics , econometrics , chemistry , chromatography
This study documents a continuous relation between audit firm size and the issuing of modified opinions in China using a panel data set of audit firms and listed firms from 2001 to 2003. The relation is robust after controlling for a set of confounding factors and dealing with endogeneity issues. It is also robust when we exclude audit firms involving foreign partners or private client firms from our sample. Our results indicate that the audit firm size effect suggested in other studies is applicable to audit markets that have not yet been dominated by a few very large audit firms as well as audit markets where client firms are partially state‐owned entities.