Fee discounting and audit quality following audit firm and audit partner changes: Chinese evidence

Hua-Wei Huang, K. Raghunandan, Ting Chiao Huang, Jeng Ren Chiou

Research output: Contribution to journalArticle

23 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)1517-1546
Number of pages30
JournalAccounting Review
Volume90
Issue number4
DOIs
Publication statusPublished - 2015 Jul 1

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Discounting
Fees
Audit quality
Audit firms
Audit fees
Audit
Earnings management
Discount
Sanctions
China

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Huang, Hua-Wei ; Raghunandan, K. ; Huang, Ting Chiao ; Chiou, Jeng Ren. / Fee discounting and audit quality following audit firm and audit partner changes : Chinese evidence. In: Accounting Review. 2015 ; Vol. 90, No. 4. pp. 1517-1546.
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Fee discounting and audit quality following audit firm and audit partner changes : Chinese evidence. / Huang, Hua-Wei; Raghunandan, K.; Huang, Ting Chiao; Chiou, Jeng Ren.

In: Accounting Review, Vol. 90, No. 4, 01.07.2015, p. 1517-1546.

Research output: Contribution to journalArticle

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