How is Audit Quality Perceived by Big 5 and Local Auditors in China? A Preliminary Investigation

• Published in: International journal of auditing Vol. 5; no. 2; pp. 157 - 175
• Main Authors: Chen, Charles J.P., Shome, Anamitra, Su, Xijia
• Format: Journal Article
• Language: English
• Published: Oxford, UK and Boston, USA Blackwell Science Ltd 01.07.2001
• Subjects: Accounting; Attitudes; Audit quality; audit quality attributes; audit services market in China; Auditing; China; Chinese audit environment; Chinese economic reforms; determinants of audit quality; differing perceptions of audit quality; Economic reform; evolution of audit regulation in China; Finance; independent auditing in China; joint venture audit firms; Joint ventures; Organization theory; Perception; Quality control; Regulation
• ISSN: 1090-6738; 1099-1123
• DOI: 10.1111/j.1099-1123.2001.00332.x

This study seeks to determine what attributes are perceived by various groups of players in the Chinese auditing market as being important to audit quality. Attributes of audit quality were incorporated into a survey instrument which was administered to auditors from a local CPA (Certified Public Accountant) firm and a Big 5 firm operating in Shanghai, as well as subjects belonging to another group—regulators. Results indicate that the attributes perceived as having the most positive effect on audit quality correspond to a very high degree with those identified in the prior (mostly US‐based) literature. Attributes thought to be most detrimental to audit quality, on the other hand, were developed from consultations with key players, and were unique to the Chinese context. Wide differences were observed between auditors and regulators (e.g., regulators and Big 5 auditors), but not among the independent practitioners (local CPAs and Big 5 auditors). In addition to heightening the current understanding of what attributes of audit quality are important to audit firms operating in emerging markets such as China, these findings are expected to hold significant implications for strategy formulation by public accounting firms in China, both local as well as international.