Chapter 8 the moderating role of corporate digitalisation in the relationship between independent directors and audit quality in Chinese listed companies

The foundation of investor trust and capital market credibility is audit quality, particularly in China, where significant corporate governance issues accompany rapid economic growth. China’s GDP grew from USD 8.53 trillion in 2012 to USD 17.96 trillion in 2022, demonstrating its increasing economic might on the international stage. At the same time, there are now over 5,500 listed companies, up from just 8 in 1992. Despite the remarkable growth of China’s capital market, frequent financial fraud scandals have exposed corporate governance flaws and poor audit quality (Narayanaswamy & Raghunandan, 2019). Good audits improve investor confidence, lessen information asymmetry, and prevent fraud (Rezaee, 2005; Bushman & Smith, 2003). Making wise investment decisions requires accurate financial reporting, especially in China’s dynamic capital market. To provide independent assurance on the veracity of business statements, external auditors are essential (Habib, 2012). Independent directors are responsible for overseeing management from the outside in China’s corporate governance framework. They mitigate moral hazard, reduce knowledge asymmetry, limit management opportunism, and foster transparency. This safeguards the interests of minority shareholders

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