Common Auditors in Supply Chain Relationships and the Provision of Trade Credit

Ling Lei Lisic; Qiliang Liu; Timothy A. Seidel; Hanzhong Shi; Angie Wang; Aleksandra B. Zimmerman

doi:10.2308/tar-2022-0142

Common Auditors in Supply Chain Relationships and the Provision of Trade Credit

Ling Lei Lisic¹; Qiliang Liu²; Timothy A. Seidel³; Hanzhong Shi⁴; Angie Wang⁵; Aleksandra B. Zimmerman⁶

¹ Virginia Tech · ² Tongji University · ³ Brigham Young University · ⁴ Huazhong University of Science and Technology · ⁵ The Hong Kong Polytechnic University · ⁶ Florida State University

The Accounting Review 2026 open access

ABSTRACT This study examines the association between a shared common auditor among suppliers and customers and trade credit. Using hand-collected pairwise trade credit data, we find that a supplier extends more trade credit to a customer audited by a common auditor. This association is robust to alternative design specifications and various sample restrictions to alleviate selection bias. We then interview trade credit managers and executives as a prelude to archival analyses exploring multiple potential mechanisms to explain this association. The collective results are most consistent with the explanation that mutual third parties to a dyadic relationship can foster trust through social connections and increased salience of reputation effects rather than that a common auditor reduces information asymmetry about the rigor of the audit process. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M41; M42.

DOI: 10.2308/tar-2022-0142
Volume: 101 (1)
Pages: 411-435
Language: en
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