The impact of accounting firm ownership structure on audit quality : an analysis with auditor reputation as a mediating variable

Abstract

Audit quality plays a critical role in ensuring capital market stability while the property rights organizational structure of accounting firms influences audit quality through governance mechanisms, auditor independence, and risk-bearing capacity. Existing research suggests that partnership-based and limited liability accounting firms differ in incentive structures and reputational dynamics; however, their heterogeneous effects on audit quality and underlying mechanisms remain insufficiently explored. This study utilizes data from Chinese A-share listed companies (2007–2023) to construct an analytical framework integrating the relationship between accounting firm ownership structure, auditor reputation, and audit quality for empirical examination. The findings indicate that: 1) Partnership-based accounting firms exhibit significantly higher audit quality than their limited liability counterparts, with auditor reputation acting as a partial mediator; 2) These effects are particularly pronounced in state-owned enterprises (SOEs), firms with lower analyst coverage, and companies with superior internal control quality. Through detailed mediation analysis and rigorous robustness checks, this research enhances understanding of how organizational characteristics influence audit quality differences, offering actionable insights for emerging markets focused on audit profession modernization. The findings contribute to regulatory reforms, guide partnership structure improvements, and science-based auditor selection criteria