Hometown-Orientated Signing Auditors' Characteristics And Audit Quality

As the external governance mechanisms,auditors play a significant role in ensuring the quality of financial information.Recently,audit-quality analyses have been pushed from the audit firm level down to the office level,then down to the signing auditor level.As the direct executor of the audit work,signing auditors'characteristics have an important impact on audit quality.Extent research mainly focuses on the effect of signing auditors' characteristics such as gender,client importance,clients' number on audit quality.However,relevant research is limited due to the data unavaibility.In China,the identities of signing auditors can be manually obtained from annual reports and the signing auditors' characteristics can be collected from the CICPA,which provides the data support for the study.Previous sociological and psychological literature argues that the growth environment has a profound and lasting influence on the individuals' thinking,behavior and so on.Therefore,this paper aims to explore the impact of hometown-orientated signing auditors' characteristics on audit quality.By manually collecting the information of the signing auditors' hometown and on the basis of the ecological culture framework,this paper examines the influence of the signing auditors' growth environment on audit quality.Specially,the impact of signing auditors with urban status,signing auditors with early poverty experience and signing auditors from the rice planting area on the audit quality are investigated.The findings of this paper are as follows:First,signing auditors with urban status are significantly negatively correlated with the probability and amount of financial restatements,indicating that signing auditors with urban status improve audit quality.Then,this paper further uses audit fees,accounting violations and audit opinions to measure audit quality,and the conclusion remains unchanged.In addition,compared with Big10 audit firms,the positive association between signing auditors with urban status and audit quality is more pronounced in non-Big10 audit firms.Compared with partnership audit firms,the positive association between signing auditors with urban status and audit quality is more pronounced in limited liability audit firms.The positive relationship between signing auditors with urban status and audit quality is more pronounced in low education level of signing auditors.Second,signing auditors with early poverty experience have a significantly positive relationship with the probability and amount of financial restatements,indicating that signing auditors who experience poverty in their childhood lead to lower audit quality.What is more,this paper further employs audit fees,accounting violations and earnings management to measure audit quality,and the results support the conclusions.Moreover,the negative association between signing auditors with poverty experience and audit quality is more pronounced in non-Big10 audit firms,limited liability audit firms and low education level of signing auditors.Third,signing auditors from the rice planting area are significantly positively correlated with the probability and amount of financial restatements,indicating that signing auditors from the rice planting area lead to lower audit quality.Then,this paper further uses audit fees,accounting violations and non-core operating income to measure audit quality,and above conclusions are still stand.Furthermore,the negative relationship between signing auditors who are from rice planting area and audit quality is more pronounced in non-Big10 audit firms,limited liability audit firms and non-auditor specialists.This study empirically examines the influence of home-orientated signing auditors' characteristics on audit quality,and makes several theoretical contributions as below:First,to my knowledge and literature in hand,this study is the first to investigate the effect of the hometown environment of the signing auditors on audit quality,which adds to the growing literature on the analysis of audit quality at the signing auditor level,further complements and enriches the relevant research on the influencing factors of audit quality.Second,on the basis of previous studies,this paper explores the effect of signing auditors' growth environment on audit quality,enriching and expanding the research dimension of signing auditors' characteristics.Third,previous sociological and psychological studies emphasize the impact of growth environment on individual behavior.Based on the existing theories and previous literature,this paper focuses on the audit field and examines the impact of signing auditors' growth environment on audit quality,and thus supplements and enriches the the impact of environment on individual and organizational behaviors.In addition,the conclusions of this paper have policy implications for the audit firm to strengthen internal management and the government to continue to promote the reform of household registration system and poverty alleviation.