Effect of international working experience of individual auditors on audit quality: Evidence from China

Xiaolin Chen, Yunhao Dai, Dongmin Kong, Weiqiang TAN*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)1073-1108
Number of pages36
JournalJournal of Business Finance and Accounting
Volume44
Issue number7-8
DOIs
Publication statusPublished - 1 Jul 2017

Scopus Subject Areas

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance

User-Defined Keywords

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

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