Financial Fraud Companies' Directorate Subsequent Governance And Its' Effect On External Audit

Financial fraud is always a focus in academic circle and practice circle. Many scholars have found that the low level of board governance is one of the main reasons of financial fraud, however, after the fraud detection, whether the directorate will take measures to improve the corporate governance? Moreover, there is a close relationship between directorate and external audit. If the directorate takes some measures to improve the corporate governance, these measures will influence external audit? At present, the studies in this research field are few at home and abroad. In order to find out financial fraud companies'the level of corporate governance after the fraud detection, and to help the supervision departments to govern the financial fraud companies, the dissertation uses this subject as the breakthrough point. Under the related system background, firstly, the dissertation constructs a frame about the directorate subsequent governance and external audit; secondly, the dissertation discusses the changes of financial fraud companies' board governance from the first year before the fraud detection to the third year after the fraud detection; thirdly, the dissertation tests the relationship between the directorate subsequent governance and external audit.From the research perspective, the dissertation has been divided into eight chapters as follows:Chapter 1 Introduction. In the introduction, we present the research motive, research object, research methodology and research framework.Chapter 2 System Background. In this chapter, firstly, we discuss the system of anti-financial fraud and the current situation of financial fraud about the listed companies; secondly, we analyze the system background, such as establishing the system of independent directors and the special committees of directorate; thirdly, we introduce the system of external audit, such as reorganizing of Chinese Accounting Firms, improving the quality of auditing standards and pushing the internationalization strategy of Chinese Accounting Firms. The dissertation is discussed in this system background.Chapter 3 Basic Theory and Literature Review. In this chapter, combining related literature results, firstly, from the perspectives of Principal-agent Theory, Stedwardship Theory, Resource Dependence Theory, Signaling Theory, State-contingent Ownership Theory, Risk Aversion Theory and Credit Mechanism Theory, we analyse the reasons that why financial fraud companies would change the directorate governance from the first year before the fraud detection to the third year after the fraud detection; Secondly, from the perspectives of Prospect Theory, Anchoring Effect, Audit Risk Theory and Primacy Effect, we explain the relationship between the directorate subsequent governance and external audit; finally, we summarize the research framework.Chapter 4 The Characteristic Analysis of the Directorate Subsequent Governance and External Audit. In this chapter, using Paired-Samples T Test, we discuss the changes of characters of directorates from the first year before the fraud detection to the third year after the fraud detection, such as the numbers of the directorate, the numbers and proportions of independent directors, the dual, the proportions of directors'shares, the directors'compensation, the turnover of directorates, the numbers of the board meeting. What is more, we tests the changes of characters of external audit, such as the types of audit opinion, auditor switch and audit quality.Chapter 5 The Effects of the Directorate Subsequent Governance on Auditors Switch in Financial Fraud Companies. In this chapter, through setting the Panel Date Logit Model, we test whether the directorate subsequent governance would influence the auditors switching.Chapter 6 The Effects of the Directorate Subsequent Governance and Auditors Switch on the Types of Audit Opinion in Financial Fraud Companies. In this chapter, through setting the Panel Date Logit Model, we test whether the directorate subsequent governance and auditors switch would influence the types of audit opinion.Chapter 7 The Effects of the Directorate Subsequent Governance, Auditors Switch and the Types of Audit Opinion on Audit Quality in Financial Fraud Companies. In this chapter, through setting the Panel Date Model, we test whether the directorate subsequent governance, auditors switch and the types of audit opinion would influence audit quality.Chapter 8 Conclusions. The chapter generalizes the basic conclusions, puts forward some suggestions, research innovation, the limitations of the study and the further research directions.Through the above research, the dissertation has drawn the following conclusions: (1) From the first year before the fraud detection to the third year after the fraud detection, the changes of the numbers of the directorate, of the dual, of the proportions of directors'shares, of the board chairmen' compensation, of the numbers of the board meeting and the turnover of directorates are significant, but the changes of the numbers and proportions of independent directors, of directors'compensation are insignificant.(2) From the first year before the fraud detection to the third year after the fraud detection, there is the N-shaped between the numbers of the directorate and auditors switching; the proportions of directors'shares has a positive and significant effect on auditor switching; the turnover of chairmen and directors is significant, but only the non-routine turnover of chairmen and directors has a positive and significant effect on auditor switching.(3) From the first year before the fraud detection to the third year after the fraud detection, the numbers of the board meeting has a positive and significant effect on the types of audit opinion; the turnover of the board chairmen, of independent directors and non-independent directors have a positive and significant effect on the types of audit opinion.(4) From the first year before the fraud detection to the third year after the fraud detection, there is a positive and significant effect on audit quality, the square of proportions of directors'shares has a negative and significant effect on audit quality, and the cube of proportions of directors' shares has a positive and significant effect on audit quality; the non-routine turnover of chairmen and the turnover of directors have a positive and significant effect on audit quality; the cross-terms of auditor switching, the types of audit opinion and the non-routine turnover of chairmen has a positive and significant effect on audit quality.