Do charitable auditors deliver better audit quality? Evidence from Chinese CPAs

This paper investigates the relationship between auditors' participation in charity and audit outcomes. Using charitable activity records of Chinese CPAs, we find that auditors who engage in charitable activities are associated with significantly better audit quality. Specifically, we examine engagement auditors and review auditors separately and find that engagement auditors with records of charitable activities demonstrate lower discretionary accruals and are more conservative in issuing modified audit opinions. However, firms with review auditors who engage in charitable activities are associated with fewer restatements. Taken together, our results suggest that an individual auditor's charity activity is associated with audit quality.