State ownership, government intervention and big four´s auditing quality

Wang, Wong and Xia(2008) suggest that for ease of collusion, the local SOEs have incentives to choose local, small auditors in the under-marketization province. We argue this institutional environment affect auditing quality of big four too. This paper indicate that in the high local government intervention province, big four´s local SOEs auditing quality is significantly lower than that of low local government intervention province. Also, because of the intervention, big four´s non-state firms auditing quality is significantly higher than big four´s local SOEs auditing quality. My findings suggest that ownership structure and institutional environment result in the cross sectional difference of big four´s auditing quality in China.