The value of auditing, audit independence, and audit pricing: a review of empirical evidence from China

Abstract

In this paper, we review the empirical research on the value of auditing, audit independence, and audit fees published in Accounting Research and Auditing Research, the two premier accounting and auditing journals in China. We identify the main themes in the three areas and assess the consistency of the available empirical evidence on the topics we review. We also highlight the innovativeness of auditing studies published in Chinese language journals to English language readers of the global accounting academic community, before introducing the papers included in this Special Issue on Auditing in China. Finally, we identify gaps in the literature and suggest avenues to help promote further research in this area.

Keywords:

• auditing
• audit fees
• audit independence
• China
• value of auditing

Acknowledgements

We thank Shaopeng Cao, Xiuhan Cheng, Jiaxin Hu, Ji Li, Mengzhe Li, Zhiyuan Liu, Shengdi Lu, Yuan Qian, and Ling Yang for their very able research assistance. We also thank Yunxia Bai, Xiaomei Han and Wei Jiang for their generous support.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 For a review of the development of audit firms and the auditing profession in China, see CICPA (2019) and Macve (2020).

2 SASAC is a government department that oversees SOEs.

3 For example, there were over 817,000 social organisations registered with the Ministry of Social Affairs, such as sports associations, research institutes, and cultural organisations, in 2018 (MoCA 2018); 1.01 million health organisations, including 34,000 hospitals in 2019 (National Statistics Office 2020); and 2956 higher education institutes (MoE 2019). These organisations spent a large amount of taxpayers’ money. For example, the country spent RMB 5017.5 billion yuan on education in 2019, including RMB 1345 billion yuan on higher education (MoE 2019), but there is little information about these educational organisations’ financial conditions and performance.

4 There were 38.583 million registered enterprises (excluding registered sole traders and agricultural cooperatives), but only 3759 firms were listed on the Shanghai and Shenzhen Stock Exchanges in China at the end of 2019, as reported at http://www.ca-sme.org/content/Content/index/id/28634 and https://top.askci.com/news/20200123/1356161156523.shtml.

Additional information

Funding

Liansheng Wu acknowledges financial support from the National Natural Science Foundation of China (No: 71932001). Jason Xiao acknowledges financial support from the National Natural Science Foundation of China (No: 71872179, 71862036) and a University of Macau Start-Up Research Grant (No: SRG2019-00191-FBA).