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Using data for 2016–2021 on a sample of Chinese non‐financial firms, this study documents a positive association between the use of hedge accounting and audit fees and finds that the new requirements under International Financial Reporting Standards 9 (IFRS 9) help mitigate this positive relationship. Channel analyses show that the new hedge accounting requirements mitigate earnings volatility and accruals management, which results in audit fee reductions. Further, the post‐IFRS 9 audit fee decrease is greater among large audit firms, firms in regions with higher marketisation levels and firms with better corporate governance. [ABSTRACT FROM AUTHOR]

Under the trend of synergistic development of digitalization and greening, this paper investigates the impact of enterprise digital transformation on audit fees and its mechanism, by using textual analysis and performing empirical tests on the data of Chinese listed companies from 2007 to 2021. It is found that enterprise digital transformation significantly increases audit fees, and green innovation partially mediates this process. The study results are robust, even after a series of robustness tests. When financing constraints and environmental regulations are low, the mediating role of green innovation between digital transformation and audit fees is more significant. In addition, green innovation has a stronger mediating role between the use of underlying technology and audit fees, while green substantive innovation has a stronger mediating role between digital transformation and audit fees. This study investigates the effect of enterprise digital transformation on audit fees from the standpoint of green innovation. It offers a new perspective on how accounting firms make audit pricing decisions, provides guidance for enterprise digital transformation and green innovation, and gives an opportunity for China to promote the synergistic transformation and development of digitalization and greening to achieve the dual-carbon goal. [ABSTRACT FROM AUTHOR]

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. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Drawing on prior studies regarding the use of peers for investment decisions and compensation practices and the recent reports which suggest that firms use peer information for audit pricing, we examine the effect of peer groups on the audit pricing process under high information asymmetry environment. Using observations from the emerging markets of China, we find that peer group information is used in audit pricing with peer groups defined as the Industry, Industry/Region, Industry/Big4, Industry/Size, and Industry/Region/Big4. This is consistent with above complementary theories. We also find evidence that peer group information is more likely to be used by firms from low-technology industries, less developed regions, and firms audited by non-Big 4 CPA firms than those from high-technology industries, more developed regions, and firms audited by Big 4 CPA firms. Also, peer group information is more likely to be used in clients firms with shorter auditor tenure and with lower analyst following compared with their counterparts. Finally, we find that clients with lower audit fees than their peer groups in the previous period are more likely to increase audit fees in the current period. Our results are qualitatively the same regardless of whether we use an overall sample across different industries or for each industry separately. These results are consistent with the peer group literature and also indicate that peer group information is more likely to be used in conditions when information asymmetry is high. [ABSTRACT FROM AUTHOR]

Purpose: This paper investigates whether the audit fees of Chinese listed firms are associated with the share pledging practice of the firm's controlling shareholders. Design/methodology/approach: This study uses the audit pricing model to estimate the association between the share pledging of listed firms and audit fees. Cross-sectional analysis is conducted on a large sample of Chinese listed firms during the period 2004 to 2019. The authors further test the moderating effects of listing on the Main Board, state ownership and abnormal audit report lag on the association between share pledging and audit fees. The results remain robust to various endogeneity tests including two-stage least squares instrumental variable analysis, entropy balancing analysis and difference-in-difference analysis. Findings: The study finds that audit fees are positively associated with the proportion of shares pledged by the listed firm's controlling shareholder in China. The results also provide new evidence that the positive association between audit fees and the share pledging of controlling shareholders could be mitigated if the firm is listed on the Main Board and/or it is a state-owned enterprise. In contrast, pledged firms with abnormal audit report lag are found to have higher audit fees than their pledged counterparts without the excessively long audit delay. Practical implications: Findings of this study have important practical implications to those charged with governance, as boards need to comprehensively understand the adverse consequences of share pledging when pursuing it as the firm's major source of financing. The study also has policy implications for stock market regulators such as the China Securities Regulatory Commission in China. Regulators could consider developing a threshold-based share pledging disclosure and pledge ratio requirements based on factors such as a firm's listing status and ownership structure. Originality/value: This study provides new evidence on the audit-related consequences of share pledging in a significant capital market. Findings of this study also enrich the existing audit literature by introducing the share pledging activities of controlling shareholders into the audit pricing decision-making model. [ABSTRACT FROM AUTHOR]

This study examines whether and how individual-level auditor industry expertise affects audit pricing and audit quality. Using 11,650 firm-year observations from China, where an audit report must be signed by two auditors, we examine the industry expertise of both signing auditors and find that expert signing auditors charge higher audit fees and provide higher quality audits. We also explore the role of fee premiums on the expertise-quality association and find that the positive expertise-quality association is moderated by fee premiums charged by specialist auditors. Finally, we find that engagement auditor expertise, either alone or in conjunction with review auditor expertise, is positively associated with audit fees and audit quality. Data Availability: Data used in this study are publicly available from the sources described herein. JEL Classifications: M4; M42. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine the effect of carbon emissions on audit fees. The authors hypothesize that firms in cities with higher carbon emission levels have lower reporting transparency, higher return volatility or are subject to higher reputation risk, causing them to be charged higher audit fees for auditing services. Design/methodology/approach: The authors use panel data of 25,960 firm-year observations from a sample of Chinese firms. The carbon emission data for each Chinese city are obtained from the China Emission Accounts and Datasets for Emerging Economies. This paper adopts a multiple regression model to study the impact of carbon emissions on audit fees. Findings: The authors find that firms located in cities with higher carbon emission levels and firms with more carbon emissions are charged, on average, a higher audit fee. This audit fee effect of carbon risk is transmitted by lessened information transparency and elevated financial risk within these firms. This paper shows that auditors consider carbon risk in their audit fee decisions and other factors that could influence audit risk and effort. Originality/value: This study draws a connection between carbon emissions and audit fees. It is especially relevant due to the increasing importance of environmental factors in the audit risk assessment. In addition, the findings suggest that a firm implementing a proactive environmental strategy benefits the economy and decreases the costs to the firm for services such as auditing. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to examine the causal relationship between mandatory CSR disclosure and financial audit efficiency. Design/methodology/approach: The authors use the unique institutional setting of China, where a subset of listed firms are mandated to disclose their corporate social responsibility (CSR) reports. The authors use propensity score matching and difference-in-differences approaches to compare audit efficiency in the pre- and post-mandatory CSR disclosure periods between the treatment and control groups. The regression models are estimated with robust standard errors clustered at the firm level. Findings: This study finds that following China's adoption of the mandatory disclosure of CSR, audit report lags decreased by 6% on average, suggesting that audit efficiency improved greatly following mandatory CSR disclosure. Moreover, this association is stronger when firms have better CSR performance, higher CSR report preparation costs, more earnings management before disclosure regulations and better internal controls and when firms belong to high-profile industries and in Big 4 (Big 10) accounting firms. Moreover, neither audit quality nor audit fees decrease when shorter audit lags occur for firms with mandatory CSR disclosures. Overall, the evidence suggests that mandatory CSR disclosure has a positive effect on audit efficiency and that the improvement of audit efficiency does not come as a consequence of reducing audit fees or deteriorating audit quality. Research limitations/implications: The results reported in this study have practical and policy implications for policymakers, accounting firms and auditors to pay more attention to CSR information. Originality/value: This study provides evidence of the causal relationship between mandatory CSR disclosure regulation and audit efficiency. It enriches the research on audit service production efficiency from the perspective of nonfinancial information disclosure. [ABSTRACT FROM AUTHOR]

This article uses the financial data of China's A-share listed companies from 2007 to 2020 and examines the impact of accounting information consistency on audit fees. The study finds that higher consistency is significantly associated with a firm's lower audit fees after controlling for other factors. After the robustness test, the conclusion remains unchanged. The mechanism test finds that higher consistency reduces audit risks and thus reduces the company's audit fees. Further research finds that the reducing effect of consistency on audit fees is significantly more apparent in companies with higher financial leverage. Overall, this article expands the research on the influencing factors of audit fees from the consistency perspective. The research conclusions have reference value for information users to use accounting information to supervise governance, improve the quality of financial statement disclosure, and reduce the company's audit fees. [ABSTRACT FROM AUTHOR]

The number of Chinese companies directly listed on foreign exchanges in the form of offshore holding companies has increased with China's rapid economic growth. However, different regulations and audit environments between China and other countries as well as the unique characteristics of offshore holding companies may increase audit risk. This study investigates the audit quality of Chinese companies listed on the Korean stock market compared to Korean companies. We find that auditors charge higher overall audit fees and hourly rates and spend more hours auditing Chinese holding companies than Korean companies. We also find that while abnormally high audit hours enhance audit quality of Korean companies, the audit quality of Chinese companies is not improved. Our findings indicate that auditors perceive Chinese companies listed in Korea as having a higher audit risk. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this study is to investigate the effects of capital market liberalization on audit reporting and pricing. The authors use the announcement of the Shanghai-Hong Kong Stock Connect program in China as a shock to capital market liberalization. Design/methodology/approach: The authors use the difference-in-differences method to study the difference in changes in the frequency of modified audit opinions and audit fees between the treatment group and the control group. Findings: This study finds that capital market liberalization increases reputational and litigation risks for auditors and leads to more conservative audit reports. In addition, capital market liberalization stimulates the management of eligible firms to improve the information environment, helps to reduce information asymmetry and decreases audit fees. Specifically, the authors identify the channels of active foreign institutional investors as a new governance mechanism through which capital market liberalization impacts eligible firm and auditor decisions. Research limitations/implications: This study complements the literature by showing that capital market liberalization may bring a new and strong governance mechanism for eligible firms and auditors. Practical implications: This study may provide new references for active foreign institutional shareholders as a new and strong governance mechanism in weak institutional regimes such as China, auditors' optimization decisions when litigation risks increase and management's improvements in the information environment under the monitoring of foreign institutional shareholders. Originality/value: Overall, this study contributes to the literature by showing that capital market liberalization can bring a new governance mechanism for the management of eligible firms and auditors in a weak institutional environment. Foreign institutional shareholders may be superior to the domestic market forces and other corporate governance in the role of monitoring the management of eligible firms and auditors. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to explore the impact of product market competition (PMC) on companies' investment in external auditing. Design/methodology/approach: This paper applies a conceptual framework derived from demand–supply analysis and a panel data set of 2,263 listed manufacturing companies in China covering the period 2012–2019. In the assessment of PMC, this study measures industry-level competition intensity and company-specific market power separately. Findings: Industries appear to engage in a lower average level of external auditing if industrial competition intensity is either too high or too low. Similarly, companies spend less on external auditing if their market power is either too strong or too weak, and the company-level inverted U-shaped relationship is much more evident in industries with weak PMC. Originality/value: This paper shows that a company's external audit strategy is affected by the level of competition it faces in its market. The findings of this paper can improve the current linear PMC–auditing theoretical framework and provide insights into the strategic auditing of listed companies in China. The findings also have significant implications for policy recommendations regarding corporate governance and market scrutiny regulations. [ABSTRACT FROM AUTHOR]

This paper examines whether there is information sharing between mutual funds and their auditors about the auditors' other listed firm clients. Using data from the Chinese market, we find that mutual funds earn higher profits from trading in firms that share the same auditors. The effects are more pronounced when firms have a more opaque information environment and when the audit partners for the fund and the partners for the listed firm share school ties. The evidence is consistent with information flowing from auditors to mutual funds, providing mutual funds with an information advantage in firms that share the same auditors. Our findings are robust to the use of audit‐firm mergers and acquisitions (M&As) as exogenous shocks and several other robustness checks. We further find that auditors benefit by charging higher audit fees for mutual fund clients and by improving their audit quality for listed firm clients. Our study provides evidence of bi‐directional information sharing between two important market intermediaries. [ABSTRACT FROM AUTHOR]

This study examines the relationship between corporate philanthropy (CP) and audit fees. Using corporate donation data from China, our investigation finds that CP is significantly positively associated with audit fees. Resource‐seeking purpose and the enhanced publicity effect may be plausible channels behind this relationship. We further find that the frequency and intensity of donations reinforce this positive association. Additional analysis reveals that the resource‐seeking effect exists in any type of enterprise, while the enhanced publicity effect only exists in non‐SOEs. Our main results remain robust to a battery of additional tests. Overall, our findings suggest that by increasing audit workload and prospective audit risk, CP could make auditors more conservative such that they charge a higher audit fee. This article emphasizes the dialectic institutional stakeholder perspective in understanding the economic consequences of CP. Both the theoretical contributions and practical implications of these findings are discussed. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of investor protection on audit fees using a quasi-natural experiment provided by the introduction of the E-interaction platform in China. E-interaction provided investors with a platform to communicate directly with listed companies and participate in discussions of corporate matters, thereby enhancing the rights and interests of small and medium-sized investors, i.e. investor protection. Employing a difference-in-differences design, I find that, firms listed on the Shanghai Stock Exchange experienced a large reduction in audit fees after the adoption of E-interaction. The results are robust to changes in event windows and alternative research designs. Further analyses demonstrate that the reduction in audit fees was greater for firms with a higher level of expropriation of minority shareholders, i.e. tunnelling. I also find that controlling shareholders' tunneling behaviours decreased after the introduction of E-interaction. Taken together, my results suggest that increased investor protection reduces audit fees by mitigating agency conflicts between the controlling shareholder and minority shareholders. [ABSTRACT FROM AUTHOR]

Our study explores the association between audit fees and clients' excess cash to clarify how institutional features shape auditor assessment on agency problems. Prior studies suggest that this association is positive because agency problems from excess cash amplify auditor business risk, which induces auditors to charge higher fees as compensation. However, we find that this association is negative for Chinese listed companies. We further find that this negative association is attributable to the institutional features of China, where auditor liabilities do not extend beyond financial statement assurance. While prior literature argues that auditors incorporate clients' agency problems into risk assessment, our results suggest that this incorporation does not naturally extend to cover agency problems from managerial misuses that are per se not audit failures. Whether auditors view agency problems from excess cash as a risk factor depends on the institutional features about the scope of their liabilities. Our study highlights the importance of institutional features in shaping auditor decisions. [ABSTRACT FROM AUTHOR]

We examine whether a firm's business strategy is associated with financial reporting violations and audit fees in an emerging market setting. We follow the typology of Miles and Snow (1978, 2003) that describes a strategy continuum with the innovative "prospector" strategy and the cost-leadership "defender" strategy at the two ends. Using data from China, we find that prospectors are associated with more financial reporting violations and higher audit fees than defenders. Specifically, prospectors are positively associated with the occurrence of inadvertent reporting violations. Further analysis reveals that the increase in audit fees for prospectors is not different among firms exposed to different levels of business risk (proxied by ownership structure, auditor size, and leverage). We conjecture that the associations between business strategy and financial reporting violations and audit fees in China are due to firm financial reporting risks arising from accounting complexity. Data Availability: Data used are available from public sources indicated in the text. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between audit fees and MD&A readability in China. We find that audit fees generally are higher when MD&A readability is lower. However, we find Big4 auditors and industry specialist auditors do not increase audit fees when MD&As are less readable while the other auditors do. We also find that it is the content unique to the reporting firm, rather than standard industry and market content in a MD&A that affects auditor fees. Our results also support that audit risk and audit efforts are two channels through which MD&A readability affects audit fees. [ABSTRACT FROM AUTHOR]

In this paper, we review the empirical research on the value of auditing, audit independence, and audit fees published in Accounting Research and Auditing Research, the two premier accounting and auditing journals in China. We identify the main themes in the three areas and assess the consistency of the available empirical evidence on the topics we review. We also highlight the innovativeness of auditing studies published in Chinese language journals to English language readers of the global accounting academic community, before introducing the papers included in this Special Issue on Auditing in China. Finally, we identify gaps in the literature and suggest avenues to help promote further research in this area. [ABSTRACT FROM AUTHOR]

Copyright of Transformations in Business & Economics is the property of Vilnius University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Using the sample of listed firms in China from 2004 to 2014, this paper investigates the impact of pyramidal ownership structure on firms' audit fees. The results show that (1) generally, the greater the number of pyramidal layers, the more audit fees the firm pays; (2) compared with non-state-owned firms, this relationship is weaker in state-owned firms. Additional tests show that the number of pyramidal layers has a stronger impact on audit fees in firms whose voting rights and cash flow rights are separated. However, CEO duality and management ownership do not affect this relationship. Moreover, in state-owned firms, the positive relationship between the number of pyramidal layers and audit fees only exists in those firms whose ultimate controllers' administrative level is lower. This paper expands the studies on the consequences of pyramidal ownership structure and introduces shareholding structure into the research on determinants of audit fees. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine whether CEO succession with gender change (male to female) affects audit fees in the Chinese setting. In addition, this study examines whether the relationship exists in both types of ownership, i.e. non-state-owned enterprises (SOEs) and SOEs. Design/methodology/approach: This study uses data from all A-share non-financial firms listed on both the Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) for the period 2009 to 2015. To draw inferences, this study uses pooled ordinary least squares regression as a baseline technique. This study performs sub-sample analyzes for robustness. To account for endogeneity, this study uses three techniques including firm fixed-effects regression, the two-step Heckman model and the system generalized method of moments (GMM). Findings: This study documents a significantly negative relationship between CEO succession with gender change and audit fees. However, the negative effect of CEO succession on audit fees is more pronounced in non-SOEs than SOEs. This study also finds, in additional analyzes, a strong negative effect of female CEO succession on audit fees in sub-sample of large, high-risk, high-performance and firms audited by non-big auditors. The main finding is robust across three endogeneity techniques. Practical implications: The findings add to the ongoing debate about the underrepresentation of women in key executive positions such as CEO. The results suggest that CEO succession from male to female has a favorable effect on the quality of internal monitoring mechanisms (due to the superior monitoring skills of women) and enhances the quality of financial reporting. The study has practical implications for regulatory bodies and corporate decision-makers; this study encourages them to look into considering women in the executive succession framework. Originality/value: This study contributes to the literature by exploring the effect of CEO succession with gender change (male to female) on audit fees in the context of China and the existence of this relationship in non-SOEs and SOEs. [ABSTRACT FROM AUTHOR]

Managers make numerous subjective judgments about other comprehensive income (OCI) due to the fair-value measurement, which increases the auditing risks and challenges for auditors. This study investigates the relationship between audit fees and the volatility of OCI in China using a large sample of Chinese A-share listed companies from 2014 to 2018. Such relationship cannot be confirmed for these companies, including those audited by Big 4 firms and the top 10 accounting firms in China, but is significantly positive for those audited by experienced auditors. Results indicate that audit firms in China generally do not seriously consider risks concerning the volatility of OCI. However, auditors with long tenures are more aware of these risks and have correspondingly higher prices compared with their peers. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to investigate whether the presence of female directors on audit committees affects audit fees in Chinese listed companies. This study also investigates whether the audit committee's gender diversity moderates the relationship between the firm's inherent situational factors (e.g. audit complexity and firm risk) and audit fees. Finally, this study investigates whether the effect of the audit committee's gender diversity on audit fees varies with within-country institutional contingencies (e.g. state-owned enterprises [SOEs] vs non-SOEs and firms that are located in more developed regions vs firms that are located in less developed regions) Design/methodology/approach: This study used the data of all A-share listed companies on the Shanghai and Shenzhen stock exchanges for the period from 2009 to 2015. The authors use ordinary least squares regression as a baseline methodology, along with firm fixed effect, Deference in Deference method, two-stage least squares regression, two-stage Heckman model and generalized method of moments models to control for the possible issue of endogeneity. Findings: The study's findings suggest that the presence of female directors on the audit committee improves internal monitoring and communication, which reduce the perceived audit risk and the need for assurances from external auditors. The results also suggest that female directors demand high-quality audits and further assurance from external auditors when the firm is more complex and riskier. In addition, the results suggest that within-country, institutional factors play significant role in shaping the governance role of gender-diverse audit committee. Practical implications: The study contributes to the agency theory by providing evidence that the interaction between agency theory and corporate governance "board composition" generates an effective monitoring mechanism and contributing to the institutional theory by finding that role of female directors on audit committee varies from context to another. In addition, this study contributes to literature review of gender diversity in the boardroom by finding the economic benefit of having female directors on audit committee. Finally, this study has implications for policy-makers in promoting regulations to legalize women presence on the board, to external auditors in assessing control risk during planning the audit, to those who responsible for appointing audit committee members. Originality/value: The authors extend earlier studies by providing novel evidence on the relationship between gender-diverse audit committees and audit fees in terms of both the supply- and demand-side perspectives; that female directors moderate the relationship between firm inherent situational factors (e.g. audit complexity and firm risk) and audit fees; and that the effect of audit committees' gender diversity on audit fees varies with sub-national institutional contingencies. [ABSTRACT FROM AUTHOR]

Purpose: Product market competition may have various impacts on audit fees. On the one hand, according to the agency theory, product market competition can mitigate agency problems between management and shareholders. For clients with higher product market competition, auditors will lower the level of engagement risk assessment and reduce the required level of audit evidence, and hence audit fees will be lower. On the other hand, according to the audit risk model, product market competition will increase client business risk and audit engagement risk. Moreover, for clients with competition advantage, client business risk and audit engagement risk will be lower, and hence a lower audit fee. The paper aims to discuss this issue. Design/methodology/approach: In this paper, the authors collect financial accounting data and audit fee data from CSMAR database. Our sample selection starts with all available observations on the Chinese listed companies during 2006–2011. Since there is a big difference in accounting practices between financial companies and other industries, the authors delete observations on financial companies. The authors further remove observations with missing data, yielding 6,709 observations for the final analysis. To define the industry, the authors use the first two digits of standard industry classification code set by China Securities Regulatory Commission. In order to reduce the effect of extreme observations, the authors also truncate the data at 1 and 99 percent. The authors use the Herfindahl–Hirschman index (HHI) and the natural logarithm of the number of listed companies within the industry to measure product market competition intensity. HHI is calculated as the sum of the squared percentage of revenues of the client firm among the total revenues of all public companies, i.e. HHI=∑i=1N(si/S)2. N is the number of listed companies in the industry, Si is the revenues for an individual firm and S is the total revenues of all public companies within the same industry. A higher HHI score indicates fewer companies dominate the industry and hence lower intensity of competition in the product market. The second measure of industry competition intensity is LNN, the natural logarithm of the total number of public companies in the same industry of a client firm. A larger value of LNN indicates a larger number of competitors in the industry, and a higher level of competition intensity. Following the literature (Kale and Loon, 2011), the authors use Lerner index (or price-cost margin (PCM)) to measure the listed company's competitive advantage. It is actually a measure of a firm's power to influence product prices in the industry. The authors adopt the Peress (2010) method to estimate Lerner index as net operating income, divided by sales, i.e. PCM=(Sales–COGS–Selling expenses–Administrative expenses)/Sales. A higher value of PCM indicates more product pricing power and a higher competitive advantage of a company. The authors also use Lerner index ranking (R_PCM) to measure the competitive advantage of a company in the industry. The authors sort PCM values in ascending order in each industry and divide into ten groups. Then, the authors assign a value from one to ten to each listed company within each group in each industry. A higher R_PCM value represents higher market power and higher competitive advantage of a company. Based on Simunic (1980) framework, the authors develop the following model to test the relationship between product market competition, competition advantage and audit fees: LNAFit=β0+β1 PMCit+β2 SIZEit+β3 INVit+β4 RECit+β5 GROWTHit+β6 PRELOSSit+β7 LEVit+β8 QUICKit+β9 OPINit+β10 IBIG4it+β11 DBIG10it+β12 SWITCHit+β13 LOCATEit+β14 STATEit+∑β YearDummies+εit. Findings: Using a sample of 6,709 firm-year observations from the Chinese stock market for the period of 2007–2011, the authors find that the product market competition intensity has a negative impact on audit fees, which means that agency cost effect is dominant in audit pricing at industry level. In addition, a company's competitive advantage in the industry has a significant and negative impact on audit fees, which means that business risk effect also plays a critical role in audit pricing of individual engagement. The findings indicate that, in determining audit fees, auditors in the emerging market of China consider both the competition intensity of their clients' product market at the industry level and the competitive advantage of the specific clients within the industry. Originality/value: The findings indicate that, in determining audit fees, auditors in the emerging market of China consider both the competition intensity of their clients' product market at the industry level and the competitive advantage of the specific clients within the industry. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this paper is to investigate whether firms with high environmental disclosure have a low possibility of non-standard audit opinions and audit fees and whether this trend is more obvious after than prior to the Measures for the Disclosure of Environmental Information (Measure) implemented in 2008. Design/methodology/approach: Based on the Measures implemented in 2008, the authors select data for the listed manufacturing firms from 2004 to 2006 (Pre-Measure) and from 2009 to 2011 (Post-Measure) as research samples to investigate the relationships between environmental disclosures, audit opinions and audit fees with difference in difference models. In addition, we also consider the influence of media attention, the polluting industry and internal control on the audit effect of environmental disclosure. Findings: The results show that the level of environmental disclosure is significantly negatively correlated with the possibility of issuing non-standard audit opinions and audit fees after measure is implemented, especially hard environmental information. Further evidence indicates that the auditing effect of environmental disclosures is stronger on firms that receive less media attention, in firms with better internal controls, and in firms belonging to industries with heavy pollution. Originality/value: In the Chinese setting, a high level of environmental information disclosures can effectively reduce the audit risk and lead to a high possibility of standard audit opinions and low audit fees. This effect is pronounced after issuing Measure. The conclusions suggest that measure and increasing environmental disclosure have an obvious positive audit effect and that firms should be forced or encouraged to disclose more environmental information from the perspective of auditors in China. [ABSTRACT FROM AUTHOR]

This paper examines (1) whether auditor type affects initial public offering (IPO) pricing; (2) whether the effect of IPO pricing is different for clients with different ownership structures. We find that (1) firms being audited by Big 4 accounting firms receive IPO premium while others being audited by local accounting firms do not; (2) Big 4 auditors receive higher audit fees than China's Top 10 or small local auditors. This paper extends the prior research (e.g., Kumar, P and N Langberg (2009). Corporate fraud and investment distortions in efficient capital markets. The RAND Journal of Economics, 40, 144–172) that reduces agency conflicts between shareholders and manager (by means of better audit quality) and also reconciles corporate misreporting and investment distortions. [ABSTRACT FROM AUTHOR]

This study examines the influence of corporate environmental performance on the propensity that auditors issue modified audit opinions and further investigates the moderating effects of internal control and greenwashing. Using a sample of Chinese listed firms, our findings reveal that corporate environmental performance is significantly negatively associated with modified audit opinions, suggesting that auditors applaud environmentally friendly firms. Moreover, internal control reinforces the negative association between corporate environmental performance and modified audit opinions, but greenwashing attenuates the negative effect of corporate environmental performance on modified audit opinions. The findings are robust to various sensitivity tests, and our conclusions are still valid after controlling for the potential endogeneity. Additional tests reveal that (1) corporate environmental performance is negatively associated with modified audit opinions only for firms without audit opinion shopping and (2) corporate environmental performance is significantly negatively associated with both earnings management and audit fees. [ABSTRACT FROM AUTHOR]

Issues related to low-balling of initial year audit fees and the resultant impact on audit quality have received significant attention from regulators in many countries. Using 9,684 observations from China during the years 2002–2011, we find that there is a significant initial year audit fee discount following an audit firm change when both of the signing audit partners are different from the prior year. The evidence is mixed if one or both of the signing partners from the prior year also moves with the client to the new audit firm. We find evidence of audit fee discounting in our analysis of fee levels, but not in our analysis of changes in audit fees from the prior year. Sanctions for problem audits and greater earnings management are more likely when there is an audit firm change that involves two new signing partners together with initial year audit fee discounting. [ABSTRACT FROM AUTHOR]