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Do social ties between two signatory auditors affect audit quality and firm value?

Chen, Xinxian, Chen, Jean Jinghan, Xiao, Jason Zezhong (2024) Do social ties between two signatory auditors affect audit quality and firm value? Accounting and Business Research, . pp. 1-36. ISSN 0001-4788. E-ISSN 2159-4260. (doi:10.1080/00014788.2024.2306531) (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided) (KAR id:105151)

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We explore the effects of social ties (including alumni relations, regional connections and employment affiliation) between the two signatory auditors (engagement and review auditors) on audit quality in China. We find that client firms with socially connected auditors have lower audit quality. The negative effect is more pronounced when the two signatory auditors are partners in their audit firms or when financial irregularities exist in their client firms. Conversely, this adverse effect is alleviated if the two auditors have attended elite schools or work for one of the Big 4 audit firms. We further find that social ties between the two auditors is negatively associated with firm value through impaired market confidence, while this negative relationship can be partially explained by impaired audit quality. Overall, our results indicate that the costs of the two signatory auditors’ social ties outweigh their benefits.

Item Type: Article
DOI/Identification number: 10.1080/00014788.2024.2306531
Uncontrolled keywords: Accounting, Finance
Subjects: H Social Sciences > HF Commerce > HF5351 Business
H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: National Natural Science Foundation of China (
Depositing User: Jean Chen
Date Deposited: 28 Feb 2024 12:48 UTC
Last Modified: 19 Mar 2024 09:29 UTC
Resource URI: (The current URI for this page, for reference purposes)

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