Are Low-quality Audits Merely Special Cases Resulted From Personal Characteristics Of Auditors?

A series of low-quality audits not only causes damage to the reputation of the auditors,but also affects social credibility of the audit profession and development of capital market.Chinese auditors actually faces lower litigation risk than that in other developed countries.Administrative sanction is becoming an alternative mechanism for lack of effective litigation system,and an important external force to improve the quality of the audit.The present researches on auditor discipline focuses on the analysis of the impact of administrative sanction rather than the causes of low-quality audits.Meanwhile,most of the studies gave the evidence of audit quality on the level of accounting firms.Fortunately,China provides a natural setting to carry out researches on individual auditor level due to data availability as audit reports must be audited and signed by two auditors.Because of this distinctive characteristics of Chinese auditing market,we can explore the audit study on audit quality from the audit firm level to individual auditor level.By studying the underlying factors leading to low-quality audits at the individual auditor level,we find that before the audit failures are detected by CSRC,the quality of audits done by sanctioned auditors is significantly lower than those done by unsanctioned auditors in the same audit firm.The quality of audits done by some sanctioned auditors after moving to a better quality-control environment passively because of audit firms merger would be better than those audits done before the merge.It indicates that low-quality audits are caused by personal characteristics given that all the auditors are constrained by the same quality control mechanism of the same audit firm.And an efficient quality control mechanism is able to limit the adverse impact of personal characteristics of sanctioned auditors on the quality of audits.