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Concentration of the supply chain and audit opinion shopping: the case of China

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  • Shuang Xue
  • Youfu Yao
  • Xuefang Wang

Abstract

The supervision and governance of opinion shopping have been an important issue for academics and regulators all over the world. Taking Chinese A-share listed firms from 2010 to 2016 as our samples and borrowing the method in Lennox (2000), we investigate the impact of concentration of the supply chain on audit opinion shopping. The empirical results show that concentration of the supply chain can increase the probability of audit opinion shopping. From the perspective of demand for audit services, supply-chain-driven opinion shopping is more pronounced when the client firm has lower bargaining power; and from the perspective of supply of audit services, supply-chain-driven opinion shopping is more pronounced in headquarters-to-branch auditor switch than in branch-to-headquarters auditor switch. Furthermore, having a common auditor of client firms in a supply chain can significantly decrease supply-chain-driven opinion shopping. This paper provides evidence of audit opinion shopping from the perspective of the supply chain.

Suggested Citation

  • Shuang Xue & Youfu Yao & Xuefang Wang, 2018. "Concentration of the supply chain and audit opinion shopping: the case of China," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 6(2), pages 135-158, April.
    • Handle: RePEc:taf:rcjaxx:v:6:y:2018:i:2:p:135-158
    DOI: 10.1080/21697213.2018.1521955
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