臺大管理論叢 NTU Management Review VOL.30 NO.2

223 NTU Management Review Vol. 30 No. 2 Aug. 2020 other industries, the number of observations varies from 11 in communication and culture to 123 in information technology. As shown in Panel C, auditor changes occur quite evenly across the years under analyses, ranging from the lowest of 60 in 2003 to the highest of 213 in 2012. Panel D provides the sample distribution according to the directional changes in auditors by state ownership. As demonstrated in this panel, there is a relatively small number of SOEs and NSOEs switching their auditors from Big-4 to Top 10 Chinese accounting firms prior to the enactment of the initiative. However, such type of switches increases more significantly after the promulgation of the government initiative to expand and strengthen domestic accounting practices. As to the upward switches (i.e., from local Chinese accounting firms to Top 10 ones), when comparing SOEs to NSOEs based on the percentage of switches, it appears that NSOEs may have stronger incentives to follow the government policies than SOEs in order to leave a good impression on the Chinese government and its regulators. Panel E illustrates the number of observations according to whether the auditor-client realignment reasons having been disclosed. As reported in the panel, 638 realignments are disclosed with reasons provided (47.61% of all observations) while 702 realignments are disclosed without revealing reasons (52.39% of all observations). Among those realignments with reasons disclosed as shown in Panel F, the observations are classified into three groups: client-related (n = 286, 42.00%), CPA firm-related (n = 268, 39.35%), and government-related (n = 127, 18.65%). 8,9 8 Some firms cited more than one reason for the auditor-client realignment decisions. Therefore, the number of observations in Panel E (n = 681) is higher than the number of observations in Panel E (n = 638) of Table 1. 9 As shown in Panel F of Table 1, the number of observations disclosed to be government-related as the reason for auditor switches increase during the post-2007 period from 31 to 96. However, the extent of increase is smaller than client-related reasons and CPA firm-related reasons of auditor realignments. Although this increase is not as large as the other two categories, it indicates that the promulgation of the government initiative has been taken seriously by firms’ management. Moreover, according to the TEJ and China Stock Market and Accounting Research ( CSMAR ) databases, some companies citing government-related reasons to realign with auditors are SOEs. This revelation shows that the State- owned Assets Supervision and Administration Commission (SASAC) may be involved in the auditor realignment decisions. Since SASAC is a government agency, companies being supervised by the agency (i.e., SOEs) may not have the same level of incentives as NSOEs to disclose the reasons regarding their decisions to realign with auditors. Hence, the possible involvement of SASAC may reduce the number of companies in the government-related category to disclose their reasons to realign with auditors.