| Summary: | 碩士 === 國立成功大學 === 會計學系 === 103 === This paper investigates the association between the top 100 audit firm ranking in China and client earnings quality. Using a large sample consisting of 11,257 firm-year observations engaging with one of the top 100 audit firms across 2003 to 2011, we find that the relation between the audit firm ranking and client earnings quality is insignificant when using pooled sample but becomes significantly positive in 2010 and 2011.
We further explore the details of the audit firm ranking and find that audit firm revenues, branch numbers, CPA numbers, punishment for problematic scores, quality scores, and comprehensive scores are influential in client earnings quality. Our results support the consideration of qualitative information in audit firm ranking in recent years and suggest that audit firm ranking may serve as a potential indicator to improve audit quality and provide useful information to the market in evaluating audit firm quality and client earnings quality. These findings should be of interest to global regulators in designing audit firm monitoring mechanism.
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