Licensing and Auditor Performance: Evidence from the CPA Exam Reform in China
Prof. Zhenyang SHI
Assistant Professor of Accounting
Department of Accounting and Operations Management
BI Norwegian Business School
Date: 14 January 2026 (Wednesday)
Time: 10:00-11:30
Venue: E22-G015
Host: Prof. Rubin HAO, Assistant Professor in Accounting
Abstract
We leverage the CPA licensing reform in China, which introduced two new subjects into the CPA Exam, to evaluate the impact of licensing on auditor performance. Our findings indicate that auditors licensed under the new regime deliver higher audit quality, as evidenced by fewer irregularities in audited financial statements and a reduced incidence of Type II errors in audit reporting. Consistent with the reform’s emphasis on risk management, these auditors display improved skills in managing client risks. Further analyses reveal that these auditors experience faster career progression and are entrusted with more significant audit engagements. Additionally, we find no evidence that the revised licensing requirements adversely affect the supply of new auditors. These findings suggest that licensing requirements focused on occupation-specific human capital—rather than general education mandates like the 150-Hour Rule—can improve auditor performance. Our study contributes to the ongoing debate about professional licensing by highlighting the role of carefully-crafted, occupation-specific requirements in shaping the outcomes.
Speaker
Zhenyang Shi is an Assistant Professor of Accounting at the Department of Accounting and Operations Management at BI Norwegian Business School. He holds a Ph.D. in Accounting from The Chinese University of Hong Kong (CUHK). Zhenyang’s research interests focus on various aspects of accounting, including firm disclosures, corporate governance, accounting regulation and policy change, corporate taxation, and audit-related studies. He got his paper published in Journal of Corporate Finance and British Accounting Review. He is currently teaching Research Methods for the Master of Accounting and Auditing program and Data-Driven Management Accounting.
All are welcome!
