To the extent that political connections bring significant economic benefits, non-top-tier firms may be induced to spend scarce resources in competing for such connections while reducing the amount of resources directed towards improving audit quality. Audit clients may also be attracted to audit firms with political connections rather than to those providing high-quality audit services. Auditors in China play a role in reducing the risk of an IPO application being rejected. Because the Chinese IPO market has become the largest in the world in recent years, this finding should be of interest to academics, practitioners, and regulators.

Yang, Z. 2013. Do Political Connections Add Value to Audit Firms? Evidence from IPO Audits in China. Contemporary Accounting Research 30 (3): 891-921.

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