Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The scale and scope of the client portfolio and audit quality at the individual auditor level: evidence from China

The scale and scope of the client portfolio and audit quality at the individual auditor level:... We examine the relation between the scale and scope of an individual auditor’s client portfolio and audit quality. Using a sample of auditor-years for the period of 2001–2016 from China, where the personal identities of signing auditors are publicly disclosed, we find that auditors with large client portfolio scale (measured by an auditor’s total audit fees from clients) provide higher quality audits (measured by discretionary accruals and the likelihood of issuing modified audit opinions). However, auditors with large client portfolio scope (measured by the number of industries where clients are located) provide lower quality audits. Further analyses indicate that auditors of higher ability and reputation tend to have larger client scales and wider client scopes. Overall, our results suggest that, at the individual auditor level, the scale of the client portfolio conveys the auditor’s ability, and given the scale, the industry and geographic scope of clients reflects the auditor’s workload. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting and Business Research Taylor & Francis

The scale and scope of the client portfolio and audit quality at the individual auditor level: evidence from China

Mao, Juan; Qi, Baolei; Zhang, Guochang
Accounting and Business Research , Volume OnlineFirst: 26 – Feb 11, 2023
Download PDF
26 pages

The scale and scope of the client portfolio and audit quality at the individual auditor level: evidence from China

Abstract

We examine the relation between the scale and scope of an individual auditor’s client portfolio and audit quality. Using a sample of auditor-years for the period of 2001–2016 from China, where the personal identities of signing auditors are publicly disclosed, we find that auditors with large client portfolio scale (measured by an auditor’s total audit fees from clients) provide higher quality audits (measured by discretionary accruals and the likelihood of issuing modified...
Loading next page...
 
/lp/taylor-francis/the-scale-and-scope-of-the-client-portfolio-and-audit-quality-at-the-ryFWCHqdie
Publisher
Taylor & Francis
Copyright
© 2023 Informa UK Limited, trading as Taylor & Francis Group
ISSN
2159-4260
eISSN
0001-4788
DOI
10.1080/00014788.2023.2165030
Publisher site
See Article on Publisher Site

Abstract

We examine the relation between the scale and scope of an individual auditor’s client portfolio and audit quality. Using a sample of auditor-years for the period of 2001–2016 from China, where the personal identities of signing auditors are publicly disclosed, we find that auditors with large client portfolio scale (measured by an auditor’s total audit fees from clients) provide higher quality audits (measured by discretionary accruals and the likelihood of issuing modified audit opinions). However, auditors with large client portfolio scope (measured by the number of industries where clients are located) provide lower quality audits. Further analyses indicate that auditors of higher ability and reputation tend to have larger client scales and wider client scopes. Overall, our results suggest that, at the individual auditor level, the scale of the client portfolio conveys the auditor’s ability, and given the scale, the industry and geographic scope of clients reflects the auditor’s workload.

Journal

Accounting and Business Research – Taylor & Francis

Published: Feb 11, 2023

Keywords: audit quality; audit fees; individual auditor; client portfolio; scale; scope; M42

References

  • Capital market consequences of audit partner quality
  • The provision of non-audit services by auditors: let the market evolve and decide
  • Diversification by the audit offices in the US and its impact on audit quality
  • The effects of focus versus diversification on bank performance: evidence from Chinese banks
  • Diversification’s effect on firm value
  • Auditor industry specialization and evidence of cost efficiencies in homogenous industries
  • Small audit firm membership in associations, networks, and alliances: implications for audit quality and audit fees
  • Growing pains: audit quality and office growth
  • An analysis of cross-sectional differences in big and non-big public accounting firms’ audit programs
  • Audit partner identification and characteristics: evidence from US form AP filings
  • Audit fees and client industry homogeneity
  • Audit partner tenure and audit quality
  • Audit partner tenure, audit firm tenure, and discretionary accruals: does long auditor tenure impair earnings quality?
  • Effects of audit quality on earnings management and cost of equity capital: evidence from China
  • Discretionary accruals, audit-firm tenure and audit-partner tenure: empirical evidence from Taiwan
  • Mandatory audit partner rotation, audit quality, and market perception: evidence from Taiwan
  • Mergers and acquisitions accounting and the diversification discount
  • Detecting earnings management
  • Too busy to mind the business? Monitoring by directors with multiple board appointments
  • Identifying the valuation effects and agency costs of corporate diversification: evidence from the geographic diversification of US banks
  • What is the relationship between audit partner busyness and audit quality?
  • Do school ties between auditors and client executives influence audit outcomes?
  • Do individual auditors affect audit quality? Evidence from archival data
  • Busy auditors, partner-client tenure, and audit quality: evidence from an emerging market
  • Corporate diversification and the cost of capital
  • Do social ties between external auditors and audit committee members affect audit quality?
  • The effect of seasonal variations in auditor workload on local government audit fees and audit delay
  • Empirical evidence on the implicit determinants of compensation in Big 4 audit partnerships
  • Does the identity of engagement partners matter? An analysis of audit partner reporting decisions
  • Is there a brain drain in auditing? The determinants and consequences of auditors leaving public accounting*
  • Performance matched discretionary accrual measures
  • A pure financial rationale for the conglomerate merger
  • The contagion effect of low-quality audits at the level of individual auditors
  • Auditor workload compression and busy season auditor switching
  • The effect of workload compression on audit quality
  • Auditor workload compression and busy season portfolio changes: US evidence
  • Diversification strategy, profit performance and the entropy measure
  • Product diversification and market value of large international firms: a macroenvironmental perspective
  • Auditor-in-charge characteristics and going-concern reporting
  • The effect of the busy season workload on public accountants’ job burnout
  • Does audit fee homogeneity exist? Premiums and discounts attributable to individual partners
  • Audit partner specialization and audit fees: some evidence from Sweden*