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

Do Government Initiatives and Reasons for Auditor-Client Realignment Influence Audit Fees and Audit Quality? Evidence from China 228 Variable Definition CONTROL VARIABLES INVTA = The amount of ending inventories divided by the amount of total assets. QUICK = The sum of cash, short-term investments, and account receivables divided by current liabilities (quick ratio). LIQ = The amount of current assets divided by the amount of current liabilities (current ratio). ROA = The amount of net income divided by the amount of beginning total assets (return on assets). TURNOVER = The amount of sales revenue divided by the amount of total assets. LOSS = Coded 1 if a firm reports a net loss and 0 otherwise. ADJRETURN = The firm’s market-adjusted annual return. BETA = The firm’s systematic risk. STDRET = The standard deviation of residuals from the market model, estimated by daily returns during the year. EM = Coded 1 if a firm reports ROA between 0 and 1% (small profits), ROA lower than the median value of other loss-making firms’ ROA (downward earnings management), or ROE between 6-7% (CSRC’s rights offering requirement), as in Chen, Sun, and Wu (2010). CIFIRM = The firm’s logged assets divided by the sum of the audit firm’s clients’ logged assets (client importance). CICPA = The firm’s logged assets divided by the sum of the audit partners’ clients’ logged assets (client importance). EXPFIRM = Coded 1 if the audit firm has more than 10% market share measured by total audit fees and 0 otherwise. EXPCPA = Coded 1 if any of two audit partners has more than 10% market share of total audit fees in the industry and 0 otherwise. SIZEFIRM = The sum of the audit firm’s clients’ logged assets. SIZECPA = The sum of the audit partners’ clients’ logged assets. LMAO = Coded 1 if a firm receives a modified audit opinion in the prior year and 0 otherwise. LEGALFORMLLP = Coded 1 if the audit firm is formed as a limited liability partnership and 0 otherwise. LEGALFORMLLC = Coded 1 if the audit firm is formed as a limited liability corporation and 0 otherwise. TOP10 = Coded 1 if the auditor is one of China’s local Top 10 audit firms, measured by the market share of total audit fees and 0 otherwise.