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In this paper, we review the empirical research on the value of auditing, audit independence, and audit fees published in Accounting Research and Auditing Research, the two premier accounting and auditing journals in China. We identify the main themes in the three areas and assess the consistency of the available empirical evidence on the topics we review. We also highlight the innovativeness of auditing studies published in Chinese language journals to English language readers of the global accounting academic community, before introducing the papers included in this Special Issue on Auditing in China. Finally, we identify gaps in the literature and suggest avenues to help promote further research in this area. [ABSTRACT FROM AUTHOR]

This paper investigates the consequences of increasing the scope of managerial judgement (ISMJ) in accounting standards via a difference-in-differences approach in the unique setting of China. A substantial increase in accruals-based earnings management is found after ISMJ, in addition to a decline in real activities-based earnings management resulting from temporarily increased sales, boosted inventory, and expense deferrals. In contrast, we find a significant increase in the relevance of accounting information. Further analysis reveals significant negative cumulative abnormal returns related to the announcement of accounting standards change over the short term. We also find a larger long-term increase in the crash risk of the stock prices of firms that engage in more accruals-based earnings management after ISMJ. All of these effects are more pronounced in non-state-owned enterprises than in state-owned enterprises. [ABSTRACT FROM AUTHOR]

We use the occasion of a change in tax policy that raised the tax rate for many of the listed companies in China to examine tax-induced earnings management (TEM) from the perspective of political connections. We find that when the tax rate increased, only those affected firms with politically connected management engaged in TEM. This suggests that, in addition to motivation for managing earnings, capability of influencing tax authorities is also an important determinant of TEM. We also find that TEM helped the firms with politically connected management to reduce their tax burden. [ABSTRACT FROM AUTHOR]