Philanthropy, audit firms culture and auditor independence.

ABSTRACT: In this study, we examine how the prosocial ethical culture in audit firms, measured as their philanthropic contributions over gross revenues, influences auditor independence. Using 5,246 audits in the Chinese market between 2010 and 2012, we find that the level of ethical culture in audit firms is significantly negatively associated with the magnitude of earnings management and the frequencies of financial restatements of their client firms. We also find this association is even stronger when auditors provide services to clients that are economically important or when signing auditors bear school ties with at least one top executive of the client. Further evidence show that the ethical culture can both act as a mechanism that attract auditors with a compatible internal norm, and great a g

SUBMITTER: Zhang Y 

PROVIDER: S-EPMC9648830 | biostudies-literature | 2022

REPOSITORIES: biostudies-literature