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Government-background customers, audit risk and audit fee

Author

Listed:
  • Chao Dou
  • Man Yuan
  • Xiao Chen

Abstract

Based on the 2007–2015 customer data of listed firms, this paper studies the impact in China of customers with a government background on the audit fee from the perspective of supply chain. It is claimed to be the first time this impact has been studied. The results indicate that the presence of a government-background customer helps to reduce the audit fee significantly. Moreover, the relationship is more evident when the customer is stable or comes from the central government, and we can also observe a stronger relationship under high financial constraints. Finally, the paper also shows that the existence of a government-background customer can effectively alleviate an enterprises’ audit risk, thus reducing the audit fee.

Suggested Citation

  • Chao Dou & Man Yuan & Xiao Chen, 2019. "Government-background customers, audit risk and audit fee," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 7(3), pages 385-406, July.
    • Handle: RePEc:taf:rcjaxx:v:7:y:2019:i:3:p:385-406
    DOI: 10.1080/21697213.2019.1703391
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    Cited by:

    1. Shijie Wang, 2023. "Accounting vs. Politics: Effects of China-US Audit Cooperation on China Concept Stocks," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 13(5), pages 1-6.
    2. Wen, Fenghua & Chen, Meng & Zhang, Yun & Miao, Xiao, 2023. "Oil price uncertainty and audit fees: Evidence from the energy industry," Energy Economics, Elsevier, vol. 125(C).

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