Auditor Experiences,Accounting Firm Size,and Client Ownership |
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Authors: | Kangtao Ye ;Rongli Yuan ;Yingli Cheng |
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Institution: | 1. Department of Accounting, School of Business, Renmin University of China, Beijing 100872, China2. Department of Accounting, School of Business, Renmin University of China, Beijing 100872, China3. Auditing Department, Renmin University of China, Beijing 100872, China |
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Abstract: | This study investigates whether accounting firms match the experience level of individual auditors with the risk level of clients in order to control audit risk. We find that accounting firms tend to assign more experienced auditors to non-state-owned clients that typically have higher tendency to engage in earnings management. Such an assignment pattern is more pronounced for non-Big 4 accounting firms. Further analysis suggests that auditors’ experience helps reduce clients’ earnings management level, proxied by abnormal accruals, and thus improves the audit quality. This study enriches the literature on the allocation of human resources and the risk control mechanism in the audit services industry, which has been seldom explored in prior studies. |
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Keywords: | auditor experiences accounting firm size client ownership audit risk |
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