In this paper, we integrate social identity theory and institutional theory to emphasize the identity-based conceptualization of organizational forms and the change of social identity as the key to evolutionary changes. Theoretically, we develop the concept evolutionary duality, which is the coexistence of institutionalization and deinstitutionalization at the same time among firms with different identities. We test our hypotheses on a unique and comprehensive panel dataset including 3164 listed Chinese firms audited by the top100 largest auditors in China between 2002 and 2008. We find that audit firms with different organizational identities exhibit distinct trends of audit quality evolution during the sample period, based on their identity group’s legitimacy. We also find that the influence of organization identity is attenuated by some internal and external factors, such as the focal auditor’s own market strength, the local government’s ideology and the involvement of local partners.