RT Article
T1 Financial Statement Frauds and Auditor Sanctions: An Analysis of Enforcement Actions in China
JF Journal of business ethics
VO 62
IS 4
SP 367
OP 381
A1 Firth, Michael
A1 Mo, Phyllis L. L.
A1 Wong, Raymond M. K.
A2 Mo, Phyllis L. L.
A2 Wong, Raymond M. K.
LA English
YR 2005
UL https://ixtheo.de/Record/1785624865
AB The rising tide of corporate scandals and audit failures has shocked the public, and the integrity of auditors is being increasingly questioned. It is crucial for auditors and regulators to understand the main causes of audit failure and devise preventive measures accordingly. This study analyzes enforcement actions issued by the China Securities Regulatory Commission against auditors in respect of fraudulent financial reporting committed by listed companies in China. We find that auditors are more likely to be sanctioned by the regulators for failing to detect and report material misstatement frauds rather than disclosure frauds. Further analysis of the material misstatements indicates that auditors are more likely to be sanctioned for failing to detect and report revenue-related frauds rather than assets-related frauds. In sum, our results suggest that regulators believe auditors have the responsibility to detect and report frauds that are egregious, transaction-based, and related to accounting earnings. The results contribute to our knowledge of auditors’ responsibilities for detecting frauds as perceived by regulators.
K1 fraud type
K1 auditor sanction
K1 auditor responsibility
K1 Audit Quality
K1 audit failure
DO 10.1007/s10551-005-0542-4