Geopolitical Relationship between the Engagement Quality Reviewer and Auditors: Cooperation or Collusion?

Abstract

Abstract: Engagement quality review is an important mechanism of internal quality management of audit firms. However, due to data limitations, previous studies mainly use experimental methods, and there are few large sample empirical studies. This paper obtains the unique data of the engagement quality reviewer, and analyzes the impact of the geographical relationship between the engagement quality reviewer and the engagement partner on audit quality. The research findings are as follows: Overall, the geographical relationship can improve audit quality. The mechanism test reveals that the geographical relationship exerts a “cooperation” effect by enhancing communication efficiency. Specifically, when the cooperation years are short or the economic importance level of the audit client is low, the effect of the geographical relationship on improving audit quality is more prominent. The heterogeneity test shows that the “cooperation” effect is more obvious in projects undertaken by the firm’s headquarters or high-risk projects; when the work intensity of project quality reviewers is higher, the communication advantage of the geographical relationship is more prominent, and the “cooperation” effect is also more obvious. This research not only enriches the theoretical literature from the perspective of engagement quality review and geographical relationship, but also has significant implication for audit firms to effectively organize and manage engagement quality review and human resource allocation.

Key words: engagement quality reviewer, geographical relations, audit quality

Ge Qiuchen, Wang Chunfei, Chen Hongkuan. Geopolitical Relationship between the Engagement Quality Reviewer and Auditors: Cooperation or Collusion?[J]. Management Review, 2026, 38(4): 194-205.

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