Different scandals around the globe during the past, in specific during the last decade, haveintrigued the stakeholders to question the roles of both auditors and management.But most of thefingers since then have been raised on the role of auditors, because it is the auditors who areentrusted with the responsibility to detect any errors or frauds in the financial reports of theclient-firm.Apart from this, we want in this study raise-up a Chinese cultural specificity that isGuanxi.In fact, Guanxi based relationship between auditor and client is the problematic that wewant to take at the center of attention.Numerous studies have been conducted by the academicresearchers, financial and professional analysts, regulatory authorities and governing bodies, andin some cases by the auditors and the firms as well regarding the effects of long-term auditor-client relationship on audit quality, equity risk premium, financial reports quality, audit pricingetc.These studies provide us with different results, both with the positive and negativeassociations and effects of long-term auditor-client relationship on the basis of different factorsand contexts.　　For long, auditing has been discussed in different studies and research areas but mostly inassociation with publicly listed companies.Less attention has been paid to the relationship ofauditors and clients as far as clients in SMEs are concerned.In any country around the globe,SMEs are of major contribution in terms of backing the economy, giving it both the boost andthe stability, as they collectively form the major chunk of the economy.If we specify our studyto the SMEs in China, SMEs provide around 80％ of urban employment, contribute 50％ of fiscaland tax revenue, account for 60％ of GDP in China.Based on these facts, and due to lessattention given to auditor-client relationship in terms of SMEs, instead of; we have directed ourconcerns towards the study of effects of auditor-client relationship on audit quality in SMEs inthis particular research study.　　In this study, we have opted for qualitative research with semi-structured interviews to be used asthe tool for data collection.Interviews were conducted with two different groups of interviewees,one group representing the auditors and the other group representing the client-firms (SMEs).Atotal of seven interviews were conducted in order to strengthen and validate the results for ourresearch question.Due to the limitations of this study, mostly in terms of cost and time, sampleswere selected from Hangzhou, China.The data interview structure, data analysis and discussion,and conclusions were all made based on existing theories summarized in the theoretical reviewof this study.The results of this study suggests that (1) Guanxi is beneficial for the audit qualityif certain risk factors like risk of auditor independence and risk of developing complacency arecontrolled; and (2) factors such as Non Audit Services, industry specialization, knowledge andexperience of the auditor, internal control in the client-firm, professional ethics, proper audit plan,providence of unbiased information by the client, and appointment of the auditor by the client-firm itself enhances the audit quality.