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Evaluation of Research Paper- When Bonding Fails: Audit Firm Oversight of Us-Listed Chinese Companies

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EVALUATION OF RESEARCH PAPER
Title: When Bonding Fails: Audit Firm Oversight of US-Listed Chinese Companies Date: 15/11/23
Author: Joseph V. Carcello, Brian T. Carver, Clive S. Lennox, Terry L. Neal

A. Describe the research problem or question. Evaluate the importance of the research question to audit practice.

First, this paper composed by Joseph V. Carcello et al describes the traditional bonding argument failed for US-listed Chinese companies due to a lack of audit quality and audit firm oversight. Last, we think that there are two importance of what the paper relates to audit practice. One is that the study can implicate outside investors may be hit twice as a result of information asymmetry. Another is whether there are any omission or inadequate regulations need to amend due to transnational factors.

B. Explain the author’s approach to solving the problem.

This paper’s authors, Joseph V. Carcello et al used experimental designing and event studying to argue that the traditional bonding argument failed for US-listed Chinese companies due to a lack of audit quality and audit firm oversight. And, authors do provide descriptive evidence on the following research question: Which parties are most likely to detect financial reporting fraud and other accounting improprieties among the US-listed Chinese companies?(RQ1) because they didn’t test it.

C. Describe the major findings of the research.

The result of this paper find two points. One finding is that US-listed Chinese companies were more likely than US-listed companies from other countries to avoid hiring high quality annually-inspected US audit firms. Another finding is that investors reacted negatively to news that US regulators would be unable to provide oversight of Chinese auditors.

D. Evaluate whether the research methodology was sound.

The research…...

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