This study examines the influence of auditor-CEO surname sharing on financial misstatement and further investigates whether the above effect depends on hometown relationship and the rarity of surnames, respectively. Using hand-collected data from China, the findings show that ACSS is significantly positively related to financial misstatement, suggesting that the auditor-CEO ancestry membership elicits the collusion and increases the likelihood of financial misstatement. Moreover, ACSS based upon hometown relationship leads to significantly higher likelihood of financial misstatement, compared with ACSS without hometown (...) relationship. Furthermore, the positive relation between ACSS and financial misstatement is more pronounced for rare surnames than for common surnames. The above findings are robust to sensitivity tests on the basis of different measures of ACSS and financial misstatement, and my conclusions are still valid after using the propensity score matching approach to address the endogeneity concerns. (shrink)

Using the original information from the identification cards of CEOs and signing auditors to hand-collect the data on CEO–auditor dialect connectedness (_CADC_), we examine the effect of _CADC_ on audit opinion shopping (_AOS_), and further investigate the moderating effect of auditor reputation. Using a sample of Chinese listed firms during the period of 2007–2019, our findings reveal that the likelihood of _AOS_ is significantly higher for firms with _CADC_ than for their counterparts. This finding suggests that _CADC_ impairs auditor independence (...) and triggers _AOS_. Moreover, the effect of _CADC_ on _AOS_ is less pronounced for _BIG10_-audited firms than for non-_BIG10_-audited firms, implying that auditor reputation attenuates the relation between _CADC_ and _AOS_. Furthermore, the above findings are robust to alternative proxies for _CADC_ and _AOS_, and our conclusions are still valid after using the Heckman two-stage regressions, the propensity score matching approach, the change model method and the regression discontinuity design to control for the endogeneity issue. Lastly, the impact of _CADC_ on _AOS_ stands only for engagement auditors, but not for review auditors. Overall, our study enriches the existing literature on _AOS_ and auditor independence. (shrink)