Purpose This study aims to examine how executives’ information technology (IT) expertise influences audit opinions in the context of digital transformation, aiming to uncover its role in improving corporate governance and audit risk evaluation. Design/methodology/approach Analyzing 2011–2020 data from Chinese A-share listed companies through regression models, it uses mechanism tests on internal control quality and governance practices, with heterogeneity analyses across ownership structures, digital maturity levels and executives’ decision-making authority. Findings Results demonstrate that IT-proficient executives significantly increase the likelihood of receiving standard unqualified audit opinions, primarily by strengthening internal controls and optimizing governance frameworks, with amplified effects observed in state-owned enterprises, digitally advanced firms and organizations granting greater strategic power to IT-experienced executives. Originality/value This paper explores new areas in audit research by identifying executive technology literacy as a non-traditional determinant of audit outcomes, bridging the study of executive characteristics with the digital governance discourse and providing actionable insights for auditor risk assessment and corporate leadership selection in technology-intensive environments.

Purpose This study aims to investigate how Confucianism in audit firms influences corporate fraud in China. The research seeks to highlight the enduring relevance of Confucian principles in modern auditing practices, particularly in promoting effective corporate governance and underscores the global significance of informal regulations in mitigating corporate fraud. Design/methodology/approach Based on China A-share listed corporations from 2009 to 2021, this paper uses empirical analysis, including ordinary least squares, instrumental variable regressions, to investigate the relationship between auditors’ Confucian values and client fraud. Findings Results indicate that Confucianism in audit firms significantly reduces both the likelihood and incidence of fraud in audited companies. This effect is attributed to improved corporate governance and the promotion of Confucian ethics – including Loyalty, Benevolence, Righteousness, Discipline and Wisdom – in client firms. Besides, Confucianism in audit firms exerts stronger effect on client firms in the regions with poorer formal institution, and Confucianism in audit firms majorly inhibits audited firm’s information disclosure fraud. Originality/value This research uniquely contributes to understanding how external auditors’ Confucian values influence corporate behavior, extending beyond previous studies that focused primarily on the impact of Confucianism among corporate insiders.

Purpose This study aims to examine the relationship between environmental, social and governance (ESG) performance and audit fees among Indian firms, while investigating the moderating roles of firm size and auditor type. The study also seeks to understand how the environmental, social, and governance dimensions of ESG influence audit pricing differently. Design/methodology/approach The study employs panel regression analysis on a sample of 268 Indian firms over the period from financial year 2012–2013 to 2021–2022. Firm size and auditor type are incorporated as moderating variables to analyze their influence on the relationship between ESG performance and audit fees. Findings The results reveal a significant negative relationship between ESG performance and audit fees, primarily driven by the social and governance pillars. In contrast, environmental performance does not have a significant effect. This negative association is stronger for larger firms and those audited by Big Four auditors, suggesting that better ESG performance leads to lower audit fees. Practical implications The findings hold significant implications for corporate governance, auditors and policymakers. Firms aiming to reduce audit costs should prioritize strengthening social and governance practices, as these factors significantly impact audit pricing. Regulators in emerging markets can leverage these insights to refine ESG disclosure norms, ensuring greater transparency and risk assessment efficiency. Originality/value This study is original in its exploration of the differential impacts of ESG pillars on audit fees, an area where limited research exists, particularly in the context of emerging markets like India. By demonstrating that social and governance factors significantly drive the negative relationship between ESG performance and audit fees, this paper fills a critical gap in understanding how specific ESG dimensions influence audit pricing. Additionally, it advances the literature by examining how auditor type, firm size and auditor industry expertise and independence moderate this relationship. These findings provide fresh insights into how organizational characteristics and auditor expertise shape the ESG–audit fee dynamic, offering a more comprehensive understanding of the intersection between ESG performance and audit practices.

Purpose This study aims to examine the impact of peer Management Discussion and Analysis (hereafter referred to as MD&A) risk information disclosure on the corporate audit demand. Design/methodology/approach Ordinary least square is used to analyze data for firms listed on China’s A-share market from 2011 to 2021. Findings The study finds that peer MD&A risk information disclosure significantly increases the demand for audits, manifested by the increase of hiring experienced auditors’ and increased audit fees, exhibiting a positive spillover effect. The mechanism test results show that peer MD&A risk information disclosure promotes corporate audit demand by increasing the perception of corporate business risk, investor attention and industry competitive pressure, thereby incentivizing companies to opt for high-quality audit services. The results of moderating effect test indicate that accounting information comparability, analyst attention and institutional investor ownership significantly enhance the positive spillover effect of peer MD&A risk information disclosure on corporate audit demand. Moreover, peer MD&A risk information disclosure improves audit quality, as reflected in reduced earnings management. Corporate audit demand can play an intermediary role in this relationship. Practical implications This study not only enriches the research in the fields of risk information disclosure and auditing but also provides a reference for information users to understand nonfinancial information disclosure. It suggests that the government should enhance the scrutiny and regulation of the quality of nonfinancial information disclosure by listed companies, creating a favorable market information environment and promoting the sustainable development of the capital market. Social implications This study provides new evidence demonstrating that strengthening and improving the nonfinancial information disclosure plays an important role in promoting audit practices, enhancing the transparency and standardization of capital markets and achieving long-term sustainable development goals. Originality/value This study innovatively explores the relationship between MD&A risk information disclosure, corporate audit demand and sustainable development. Based on this exploration, we propose policy recommendations emphasizing the need for regulatory authorities to strengthen oversight of nonfinancial information disclosure. This would promote audit practices and market transparency, thereby supporting the achievement of sustainable development goals.

Purpose This study aims to investigate whether equity incentives granted to rank-and-file employees influence audit pricing in US firms. While prior research has primarily focused on executive compensation, this study explores how broad-based stock options compensation impacts auditors’ risk assessments and engagement outcomes, particularly through the lens of agency theory and behavioral risk theory. Design/methodology/approach Using a sample of 19,588 firm-year observations from 2004 to 2020, the study uses multivariate regression models, path analysis, entropy balancing and two-stage least squares to examine the relationship between rank-and-file employees’ stock options and audit outcomes. Findings This study documents a significant positive association between rank-and-file employees’ stock options and audit fees, suggesting that auditors view these incentives as indicators of elevated audit risk. This association is more pronounced among smaller firms, where governance and oversight mechanisms tend to be weaker. A path analysis shows that the relationship is mediated by a higher likelihood of material internal control weaknesses. Additionally, this study finds that rank-and-file equity incentives are associated with longer audit report lags, consistent with increased audit effort by auditors. Practical implications The findings of this study suggest that audit standards should be broadened to include the evaluation of compensation and financial arrangements not only for executives but also for rank-and-file employees. Originality/value By extending the audit pricing literature beyond executive incentives, this paper highlights how broader compensation structures shape audit risk perceptions and engagement outcomes. It further uncovers a mechanism through which rank-and-file stock options influence audit fees, offering new insight into how employee compensation incentives affect audit outcomes.

Purpose The impact of mandatory audit partner rotation and audit firm rotation on audit performance is a longstanding academic and practitioner debate. This paper aims to explore the effects of both audit firm and audit partner rotation (dual rotation) on audit quality and timeliness in the pre- and postrotation periods. Design/methodology/approach In China, government regulations mandate audit partner rotation every five years for all listed companies and audit firm rotation every five years for certain designated companies. Moreover, this paper can distinguish clearly whether an auditor change is associated with a mandatory rotation policy. Therefore, this paper can examine the potential effects of dual rotation in the pre- and postrotation in the Chinese setting. Findings This paper find mixed results regarding postrotation audit quality, and this paper observes that postaudit firm rotation audits take longer to complete. This paper also considers the prerotation effects of both the audit firm rotation and audit partner rotation, and finds that the prerotation effects mainly occur before the audit firm rotation. Specifically, departing audit firms provide higher audit quality and take longer to perform the audit in the final year of the engagement, suggesting that these departing audit firms may be less susceptible to management pressure when they know their term is ending. Originality/value This paper explores the potential implications for audit performance in both the pre- and postrotation periods, which contribute to the limited literature on rotation-period auditor behaviors. The findings suggest that policymakers in China and similar settings may need to consider the effects of auditor rotation policies on both the departing auditor and incoming auditor.

Purpose This study aims to examine whether and how auditors respond to government debt. Design/methodology/approach This study investigates how auditors respond to increasing government debt using a data set covering 286 cities in China between 2007 and 2019. Instrumental variable approach, quasi-natural experiment and other robustness checks are used as well. The regression models are estimated with robust standard errors clustered at the firm level. Findings This study finds that auditors charge higher fees and issue more modified audit opinions to firms located in cities with higher government debt. Further analysis shows that the auditor’s responses are primarily caused by higher financial constraints, deterioration in financial reporting quality and higher business risk, which lead auditors to exert more effort. The impact of government debt on audit responses is weaker for state-owned enterprises and firms with more institutional ownership. Research limitations/implications This study offers valuable insights for policymakers in emerging markets aiming to understand the effects of government debt on auditors’ perspectives. Originality/value This study sheds light on an unexplored yet important consequence of government debt on firms through the lens of auditors.

Purpose This study aims to examine the prevalence of logical inconsistencies between key audit matters (KAMs) and audit opinions in Chinese audit reports and their impact on investor trust as they may undermine the credibility of audit reports. Design/methodology/approach Taking A-share listed companies on the Shanghai and Shenzhen stock exchanges in 2016–2022 as the research sample, this study uses the BERT model to quantify the net negative tone of KAMs disclosures. It assesses the logical consistency between KAMs and the probability of a modified audit opinion by examining their relationship and explores the influencing factors and their impact on investor market reactions. Findings The net negative tone of KAMs disclosures and the probability of a modified audit opinion show a positive correlation. Thus, auditors convey their risk perception of clients’ financial statements through the tone of KAMs disclosures, with a supplementary effect on audit opinions. The normal net negative, net negative at the firm level and net negative in “matter description” tones are positively associated with the likelihood of a modified audit opinion. Reputation protection and information supply motivations enhance the logical consistency between KAMs’ tone and audit opinions, whereas economic motivations partially weaken it, and stricter internal control and stronger external supervision reinforce it. When the tone of KAMs disclosures aligns logically with the audit opinion, investor confidence in the audit report increases. Originality/value This study expands research in the field of audit reports from the perspective of “logical consistency” and provides a simple tool for assessing audit report quality.

Purpose This study aims to investigate whether and how auditors price corporate compliance programs. Design/methodology/approach Using a unique experiment of the implementation of corporate compliance programs in China’s state-owned enterprises (SOEs), the authors conduct a staggered difference-in-differences (DID) research design. Findings The authors find that audit pricing of pilot SOEs declines after the implementation of corporate compliance programs. Mechanism tests reveal that corporate compliance programs significantly reduce regulatory scrutiny and corporate misconduct, while improving the quality of internal controls. This, in turn, supports auditors’ perception of a reduced audit risk. Moreover, the effect of corporate compliance programs on audit pricing is more pronounced in firms with higher compliance risk and those audited by the Big 4 auditors. The additional analyses show that after the implementation of corporate compliance programs, auditors are more likely to issue clean audit opinions and reduce audit delays. Originality/value This study fills a gap in the literature by examining the unintended spillover effects of corporate compliance programs on auditors’ behaviors and decisions. This research also adds to the ongoing discussion about the trade-offs between the costs and benefits of corporate compliance.

Purpose This study aims to examine how ESG rating uncertainty affects audit quality and explains its mechanisms and boundary conditions. Design/methodology/approach To explore the relationship between ESG rating uncertainty and audit quality in the Chinese market, the authors selected A-share listed companies as the empirical analysis sample. Robust empirical analysis methods, including instrumental variable methods and propensity score matching, were used to ensure result robustness. Findings Through empirical research, the authors find a significant positive correlation between ESG rating uncertainty and audit quality. Further mechanism analysis shows that ESG rating uncertainty creates an information effect, improves auditors’ judgment capabilities on risk matters and reduces auditor–client relationship mismatch, ultimately increasing audit quality. The authors explore the boundary conditions of the impact of ESG rating uncertainty on audit quality through information demand and information reception capabilities. The results indicate that when auditors have strong information demand and reception capabilities, the impact of ESG rating uncertainty on audit quality intensifies. Originality/value This study enriches the literature by providing empirical evidence on how ESG rating uncertainty affects audit quality, with a focus on the information effect. It explores boundary conditions from the perspectives of information demand and reception capabilities, enhancing the understanding of the economic consequences of ESG rating uncertainty for auditors’ information utilization.