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    Failure of Auditors: The Lack of Compliance for Business Combinations in China

    Access Status
    Fulltext not available
    Authors
    Taplin, Ross
    Zhao, Yafanag
    Brown, Alistair
    Date
    2014
    Type
    Journal Article
    
    Metadata
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    Citation
    Taplin, R. and Zhao, Y. and Brown, A. 2014. Failure of Auditors: The Lack of Compliance for Business Combinations in China. Regulation and Governance. 8 (3): pp. 310-331.
    Source Title
    Regulation and Governance
    DOI
    10.1111/rego.12011
    ISSN
    1748-5983
    School
    School of Accounting
    URI
    http://hdl.handle.net/20.500.11937/49689
    Collection
    • Curtin Research Publications
    Abstract

    This empirical study investigates the compliance of 344 Chinese listed companies with the Accounting Standard for Enterprises No. 20-Business Combination, a mandatory reporting standard applicable to companies involved in business combinations. China has recently reformed its auditing sector, enabling private firms to provide auditing services. The results of the study show a low level of compliance by Chinese listed companies. While companies audited by Chinese domestic auditors have significantly lower compliance than companies audited by Big Four auditors on supplementary disclosure that is mandatory under the Chinese accounting standards, compliance remains low even after companies receive unqualified reports from these international auditors. There appears to be a lack of commitment, and possibly expertise, among Big Four auditors, in fully applying the reporting requirements of the business combination standard in a Chinese setting. This raises concerns about the independence of Chinese auditing in disclosing reliable information about business combinations. Broader theoretical contributions of the paper go beyond the Chinese context by problematizing whether well-resourced international auditors uphold internationally expected standards or succumb to local non-compliant practices.

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