Research On Auditor Independence Based On Configuration Frame Of The Right To Select And Engage Auditor

The research on the auditor independence has been an important field in audit research. The failure of audit does not only harm the economic value of audit, what is more important, it may also result in the loss of people's trust in audit and then result in the instability of the capital market. After a series of financial fraudulent practices as Enron event happened, the issue of the auditor independence has attracted great attention of all circles and brought a series of system arrangements, theoretical contributions and arguments.The research in this dissertation is carried out based on the researches of Magee (1990), Kofman and Lawarree (1993), Lee and Gu (1998) and Mayhew and Pike (2004) on the relation between the right to engage auditor and auditor independence. This article first generalizes and abstracts the basic configuration types of the right to select and engage enterprise auditing auditor: (1) Configuration Type A----to engage an auditor by the accounting report provider; (2) Configuration Type B----to engage an auditor by the accounting report user; (3) Configuration Type C----the configuration combined with Type A and Type B. Based on this, a concept of complete frame for the configuration right to engage an auditor and the auditor independence has been formed. In comparison with other researches on the auditor independence, the difference is that it stresses an analysis frame for complete consideration of auditing micro-mechanism and macro-behaviour on the basis of configuration of the right to engage an auditor. It has adequately considered the organic combination of individual motivation and collective behaviour. Any method to separately discuss the configuration of auditor employment right and the auditor independence is not comprehensive.Based on the conformation of the above analysis frame, with perfect competition, monopoly competition and oligarch monopoly competition as auditing environment, this article sets up the ordinary analysis frame for the configuration of the right to engage auditor and the auditor independence under various conditions of auditing competition market. It perfectly open out the internal relation between the configuration of the right to engage auditor and the auditor independence as well as the features of the auditor independence under different conditions of auditing market so as to, based on this, give a annalistic proof to show whether the problems of auditor' economic dependence, low-price undertaking, tenure, charge, non-auditing service, legal obligation and report would influence the auditor independence. The conclusion shows that under the realistic society, in the above two configuration states of the right to engage auditor, it is seldom to see a state that exists singly. That is to say, one part of public certified auditor in enterprises are selected and engaged by the accounting report providers, the other part of public certified accounts are selected and engaged by the accounting report users. Whereupon, the conclusion whether the low-price undertaking, the tenure of a auditor, non-auditing service, the height of auditor report and the addition and reduction of their legal obligations may result in the decrease of the independence of the collective of auditor should depend on analysis according to the actual circumstances. Namely, it depends on the proportion occupied by each of the two configurations of the right to engage auditor, the distribution of auditor report, the degree of auditor competition, the supervision and administration and other integrated auditor functions on the auditing market. Therefore, within a colony of public certified auditor that contains diversity and complexity, the proof result of statistics made by taking different sample from different colony structures is naturally different and even contrary one another in conclusion.Furthermore, this article, by making use of Evolutionary Game Theory Analysis to analyze the market developing scale of the auditor trade system and administrative promotion mode, brings forward that, under different configuration of the right to select and engage auditor, public certified auditor may form different strategic patterns in stability of evolution. This will result in different practices and regulations of independent audit. Meanwhile, during the evolution course of configuration of the right to select and engage auditor, there exists strong historical path dependence in the development of independent audit system.Finally, this article puts forward some policy proposals to promote the development of China's auditor trade.