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Title: Government ownership, accounting-based regulations, and the pursuit of favorable audit opinions: Evidence from China
Author(s): Chan, Koon Hung 
Author(s): Lin, K. Z.
Wang, R. R.
Issue Date: 2012
Publisher: American Accounting Association
Journal: Auditing: A Journal of Practice & Theory 
Volume: 31
Issue: 4
Start page: 47
End page: 64
This research finds that local government-controlled companies are able to obtain more favorable audit opinions from local auditors when they face the need for new equity financing or the threat of exchange delisting. We capture this ability by comparing the observed opinions that companies receive from local auditors with those that we predict they would receive if they used a Big 4 auditor. Our empirical results highlight the importance of understanding political and economic institutions when analyzing the reporting behavior of managers and auditors in a transition economy, and suggest that regulators should be aware of the unintended consequences of basing capital market resource allocation decisions on reported accounting earnings, which can be subject to significant managerial discretion.
DOI: 10.2308/ajpt-50227
CIHE Affiliated Publication: No
Appears in Collections:BHM Publication

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