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Does CEO–Auditor Dialect Connectedness Trigger Audit Opinion Shopping? Evidence from China

Author

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  • Xingqiang Du

    (Xiamen University)

  • Liang Xiao

    (Xiamen University)

  • Yingjie Du

    (Shanghai University)

Abstract

Using the original information from the identification cards of CEOs and signing auditors to hand-collect the data on CEO–auditor dialect connectedness (CADC), we examine the effect of CADC on audit opinion shopping (AOS), and further investigate the moderating effect of auditor reputation. Using a sample of Chinese listed firms during the period of 2007–2019, our findings reveal that the likelihood of AOS is significantly higher for firms with CADC than for their counterparts. This finding suggests that CADC impairs auditor independence and triggers AOS. Moreover, the effect of CADC on AOS is less pronounced for BIG10-audited firms than for non-BIG10-audited firms, implying that auditor reputation attenuates the relation between CADC and AOS. Furthermore, the above findings are robust to alternative proxies for CADC and AOS, and our conclusions are still valid after using the Heckman two-stage regressions, the propensity score matching approach, the change model method and the regression discontinuity design to control for the endogeneity issue. Lastly, the impact of CADC on AOS stands only for engagement auditors, but not for review auditors. Overall, our study enriches the existing literature on AOS and auditor independence.

Suggested Citation

  • Xingqiang Du & Liang Xiao & Yingjie Du, 2023. "Does CEO–Auditor Dialect Connectedness Trigger Audit Opinion Shopping? Evidence from China," Journal of Business Ethics, Springer, vol. 184(2), pages 391-426, May.
    • Handle: RePEc:kap:jbuset:v:184:y:2023:i:2:d:10.1007_s10551-022-05126-w
    DOI: 10.1007/s10551-022-05126-w
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