Auditor Disaffiliation Program in China and Auditor Independence

• DOI: 10.2308/aud.2009.28.1.29
• Publication Date: 2009-05-18T18:46:27Z
• Authors: Ferdinand A. Gul; Heibatollah Sami; Haiyan Zhou
• Keywords: Auditor independence; Independence; Affect; Quality audit

SUMMARY: This study examines whether the disaffiliation program introduced by Chinese government improved auditor independence and quality affects this relationship. Auditor is measured in terms of likelihood receiving a qualified report level earnings management (measured noncore operating income). The results show that audit opinions for listed companies significantly increased, decreased, after auditors were disaffiliated. However, audited without any affiliation also showed an increase decrease earnings, possibly because increased surveillance regulatory bodies accompanied act disaffiliation. association between stronger small than large auditors, initial lower auditors. size, however, did not affect earnings.