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

Xiaolin CHEN, Yunhao DAI, Dongmin KONG, Weiqiang TAN

Research output: Contribution to journalArticlespeer-review

16 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. Copyright © 2017 John Wiley & Sons Ltd.
Original languageEnglish
Pages (from-to)1073-1108
JournalJournal of Business Finance & Accounting
Volume44
Issue number7-8
Early online date17 Apr 2017
DOIs
Publication statusPublished - Jul 2017

Citation

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 & Accounting, 44(7-8), 1073-1108. doi: 10.1111/jbfa.12257

Keywords

  • International working experience
  • Individual auditor
  • Auditor working experience
  • Audit quality
  • China

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