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Vol.12 No.8
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A Study on Audit Regulation Engagement Interview and Audit Quality

The Journal of Industrial Distribution & Business / The Journal of Industrial Distribution & Business, (E)2233-5382
2021, v.12 no.8, pp.7-19
https://doi.org/https://doi.org/10.13106/jidb.2021.vol12.no8.7
YIN, Hong
DU, Yanbin
YIN,, H. , & DU,, Y. (2021). A Study on Audit Regulation Engagement Interview and Audit Quality. The Journal of Industrial Distribution & Business, 12(8), 7-19, https://doi.org/https://doi.org/10.13106/jidb.2021.vol12.no8.7
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Abstract

Purpose: This paper aims to investigate (1) whether the interviewed auditors conduct higher quality audit than the non-interviewed auditors and (2) whether the frequency of audit engagement interviews has an impact on audit quality. Research design, data, and methodology: Using a sample of Chinese A-share listed firms between 2011 and 2019, this paper empirically tests the effect of audit engagement interviews on auditor's behavior. We collect the data of audit engagement interviews on the CICPA's website. We use OLS regression, fixed-effect model and random-effect model to examine the association between audit engagement interviews and audit quality. Results: Findings indicate that the audit quality of the interviewed auditors is significantly greater than that of the non-interviewed auditors. The frequency of the audit engagement interviews is positively associated with audit quality. The interviewed auditors spend significantly more time on the audit. Furthermore, the positive association between audit engagement interviews and audit quality only exists in non-Big 4 auditors. Conclusions: Our findings provide evidence for the effectiveness of audit regulation enforcement. The results suggest that in an emerging market with weak legal systems, preventive regulations such as audit interviews have a deterrent effect and are necessary in alleviating information asymmetry and improving information environment.

keywords
Audit Engagement Interview, Audit Quality, Discretionary Accruals, Audit Delays

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