Jiang, Jin and Ye, Rui ORCID: https://orcid.org/0000-0002-9366-648X (2026) The spillover effects of audit firms’ engagement in government audits: evidence from China. Journal of International Accounting Research. ISSN 1542-6297 (Print), 1558-8025 (Online) (In Press)

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Abstract

This study investigates whether and how private sector audit firms ’ engagement in government audits influences their audit decisions for local publicly listed firms in China. Although such engagement may enhance auditors ’ understanding of the local business and regulatory environment, it may also create economic incentives that compromise auditor independence. We find that audit firms involved in government audits issue fewer modified audit opinions and tend to charge higher audit fees to local publicly listed clients. These findings highlight a potential unintended consequence of government procurement of audit services: economic ties formed through government audit contracts may spill over into private audit firms ’ commercial audit engagements, affecting audit quality and pricing. Our study has important implications for policymakers and regulators designing procurement, oversight, and rotation policies for government audit engagements, and offers insights for capital market participants relying on auditors who engage in government audits.

Item Type:	Article
Uncontrolled Keywords:	audit quality, audit fees, government audit, knowledge spillover, rent-seeking
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce > HF5601 Accounting
Faculty / School / Research Centre / Research Group:	Greenwich Business School Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) Journal of Economic Literature Classification > Political Economy, Governance, Finance and Accountability (PEGFA) Greenwich Business School > School of Accounting, Finance and Economics
Last Modified:	08 Sep 2026 08:47
URI:	https://gala.gre.ac.uk/id/eprint/54358

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