Executive Integrity, Audit Opinion, and Fraud in Chinese Listed Firms
41 Pages Posted: 1 Jan 2013
There are 2 versions of this paper
Executive Integrity, Audit Opinion, and Fraud in Chinese Listed Firms
Date Written: October 1, 2012
Abstract
We examine the influence of auditors on mitigating corporate fraud in China, which is known to have weak legal enforcement, weak investor protection along with tight control of the media and labour unions. We find that firms with executives that have lower integrity, indicated by a greater degree of earnings manipulation, are associated with higher propensity of regulatory enforcement actions against corporate fraud in the subsequent year. We show that this effect is moderated by the issuance of a modified audit opinion report by the auditors. This finding implies that auditors can serve as external governance mechanism to discourage executives with lower integrity in committing fraud. Our results have policy implications for further strengthening auditor independence in emerging countries like China.
Keywords: Integrity, auditor, earnings management, fraud, China, MAO
JEL Classification: G15, G30, K22, M41
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Corporate Fraud and Managers' Behavior: Evidence from the Press
By Jeffrey R. Cohen, Yuan Ding, ...
-
Video: Pioneers in Finance: An Interview with Michael C. Jensen - Part 1 Video 1
-
Bridging the Audit Expectation Gap: The Perception of ICAN Members
-
A Business Ethics Perspective on Sarbanes Oxley and the Organizational Sentencing Guidelines
By David Hess
-
Financial Statement Fraud: Some Lessons from US and European Case Studies
By Niamh M. Brennan and Mary Mcgrath
-
The Impact of Materiality: Accounting's Best Kept Secret
By Niamh M. Brennan and Sidney J. Gray
-
Because That's Where the Money Is: Toward a Theory and Strategy of Corporate Legal Compliance
-
Video: Pioneers in Finance: An Interview with Michael C. Jensen - Part 2 Video 3
-
Do Financial Analysts Perform a Monitoring Role in China? Evidence from Modified Audit Opinions
By Jiandong Chen, Rong Ding, ...
-
CEO Behavioral Integrity, Auditor Responses, and Firm Outcomes
By Shane S. Dikolli, Thomas Keusch, ...