Do Individual Auditors Have Their Own Styles? Evidence from Clients' Financial Statement Comparability in China

Haina Shi, Wen Wen, Gaoguang Zhou*, Xindong Zhu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

SYNOPSIS: In this study, we investigate whether individual auditors are associated with the comparability of their clients’ financial statements, based on a sample of Chinese companies audited by ten large audit firms. We demonstrate that individual auditors have an incremental effect on comparability, beyond the office-level effect. We also find that the style of individual auditors is stronger when they are affiliated with Big 4 audit firms (compared to non-Big 4 large audit firms) and when they are industry experts. In addition, two possible channels of enhanced comparability are identified: (1) clients’ accounting flexibility, which provides opportunities for auditors to exert influences; and (2) individual auditors’ characteristics, such as age, position, and academic degree, which affect auditors’ abilities to exert influence. Our results are robust to alternative comparability and industry expertise measures, to various sampling methods, and to corrections for potential endogeneity problems.

Original languageEnglish
Pages (from-to)187-215
Number of pages29
JournalAccounting Horizons
Volume35
Issue number3
Early online date26 Feb 2021
DOIs
Publication statusPublished - Sep 2021

Scopus Subject Areas

  • Accounting

User-Defined Keywords

  • Financial statement comparability
  • Individual auditors
  • Industry expertise

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