A Study On Remuneration Of Certified Public Accountants Paid By Listed Companies In Chinese Securities Market

It is still on an initial stage to study behavior of Chinese Certified Public Accountants (CPA) based on the analysis of practical fees paid by the audited listed companies in China to the accounting firms to which the CPAs belong since the listed companies in China are requested to disclose the remuneration paid to the accounting firms from the year of 2001 .The author bases its pioneer study of the payments to the accounting firms on the concerned literatures both from home and abroad by employing the data of the listed companies in China from 2000 to 2003.The literatures used to focus their attention on the correlation between the accounting fraud of the listed companies and the behavior of the CPAs through practical examples. The significance of the study by the author lies in that the thesis puts forward a method to improve the auditing quality and the accounting information disclosure by studying the payments to the accounting firms and the behavior of the CPAs through data analysis of the listed companies in China from 2000 to 2003 for which such economic theories as the demand-supply theory, the game theory, supervision theory and corporation governance theory as well as mathematic models and reasoning analysis are adopted.The thesis analyzes the disclosure of the payments to the accounting firms by the listed companies in China from 2000 to 2003 through which the author holds that the public disclosure of the payments is an effective method although the disclosure quality is still dissatisfactory. The thesis set up a model in which such factors as the assets amount, the number of subsidiary companies, account receivables, the auditor's opinion, the liability-to-asset ratio, the revenue-to-net asset ratio, operational cash flow per share and so on are included. It proves that the model is obviously correlated to the study of remunerations to the accounting firms, the logarithm of the asset amount and square root of the number of subsidiary companies are also obviously correlated to the study of the payments to the accounting firms, the auditing qualities of the accounting firms are also improved year by year. There is no evidence in the data analysis to find the collusion between the listed company and the accounting firms.The second, transportation fees during the auditing, location of the accounting firms, location of the listed companies as well as the independence of the accounting firms are regarded as the factors added in the model for the first time . The analysis finds out that an accounting firms which is located in a different city compared with the listed company is less likely to be independent than the one located in a same city as the listed company, which can be proved by some well-known cases occurred between the accounting firms and the listed companies.The third, the thesis firstly studies on the payments to the accounting firms by the companies which get listed in the Chinese stock market through Initial Public Offering (IPO) from 1999 to 2004. There is no evidence in the data analysis to find the collusion between the listed companies and the accounting firms. The thesis firstly makes a thorough analysis to the strategies carried out by the world top four accounting firms in China and points out that there is possibility that the world top four accounting firms tend to dominate the auditing market in China at the price of lowing their auditing quality and fees.The forth, thesis studies the payments to the accounting firms by the companies which are entitled to allocate stocks, special listed companies and the companies which change the accounting firms in order to analyze the auditor's independence. The data analysis shows no sign that the CPAs have disobeyed the principle of independence.At last, the accounting frauds take place in world stock markets. The Chinese stock market is no exception. Broadly speaking, the author does not find a sign that the Chinese CPAs have lost the independence. By in-depth analysis of Chinese auditing system, corporation governance mechanism and supervision system of accounting information, the author holds that the supervision system of the accounting information is effective and draws a conclusion for the thesis that basic solution to improve the auditing quality is to upgrade corporation governance mechanism and step up the supervision of the accounting information.The practical significance of the thesis lies in that it demonstrates the weakness of the current auditing system in China and provides a reference for building reasonable and scientific supervision methods of the accounting information, shaping effective auditing system and guaranteeing the quality of the accounting information. The author also holds that the payments to the accounting firms should be well regulated, action by the world top four accounting firms in China should be paid more attention in order to avoid their illegal dominance in Chinese auditing market, excessive limitation should be lifted upon fees of consultation services, which have been considered to affect the auditor's independence, in order not to hinder the development of the consultation market in China and the public disclosure of the payments to the accounting firms , an effective system , should be promoted in various kinds of enterprises in China.