RT Article
T1 Buy, Lie, or Die: An Investigation of Chinese ST Firms’ Voluntary Interim Audit Motive and Auditor Independence
JF Journal of business ethics
VO 102
IS 1
SP 135
OP 153
A1 Chu, Alex G. H.
A1 Du, Xingqiang
A1 Jiang, Guohua
A2 Du, Xingqiang
A2 Jiang, Guohua
LA English
YR 2011
UL https://ixtheo.de/Record/1785642553
AB In the Chinese stock market, special treatment (ST) firms are the firms listed as facing imminent danger of delisting, unless they return to profitability after reporting two consecutive annual losses. Some ST firms voluntarily pay substantial fees to their external auditors to conduct interim audits, which are not required by regulations. In this study, we investigate and find that ST firms that pay for voluntary interim audits report greater discretionary accrued earnings, higher non-operating earnings, and higher returns on assets in ensuing annual reports. As a result, these firms are more likely to return to profitability and reduce their delisting risk. Our results, which contribute to the current debate on auditor independence, appear to be consistent with the possibility that ST firms “buy” external auditors’ cooperation to manipulate earnings when faced with the threat of delisting.
K1 China
K1 delisting
K1 Special Treatment
K1 earnings manipulation
K1 voluntary interim audit
K1 auditor independence
K1 Business Ethics
DO 10.1007/s10551-011-0804-2