The Study Of Chinese Accounting Firms’ Audit Quality Based On Auditor Size

The study of accounting firms’audit quality always has been a hot topic, while auditor size as an audit quality important influence factor is payed close attention. A many of foreign research showed that auditor size has stimulative effect to auditing quality. In China, the controversy about the relationship between accounting firm scale and audit quality is acute, which is based on our country specific conditions and the characteristics about certified public accountants and audit market, so provides a number of empirical support. Meanwhile, auditing firms need to review the relationship between auditor size and auditing quality, facing the intense market competition of globalization and internationalization, especially when implement "bigger and stronger" and "perfect and specialization" strategies.We need to further study auditing firm’s development ways and their characteristic advantages. Current researches weakened the connotation of audit quality which is the integrate about the process quality and outcome quality; ignored the promoting effects of technological advantages and talents accumulation which are formed by scale and the achievement ways of the core competence; rarely involved the research of scale changes which caused the individual auditing quality behavior choice.This article integrated audit quality process and results from the perspective of auditor size, and constructed audit quality affected factors system. Then, we examined the diversity of audit quality in different scale, as well as one CPA firm’s audit quality measures after auditor size changes in analyzing current regime and theories.Full text is divided into six chapters. Chapter 1 is introduction. This chapter basically explains the theoretical values and practical significance of this subject, as so as related concepts, research contents, structures and research methods. It indicates that audit quality is the integrated of processes and results, which mainly reflected in audit inherent characteristics, demands and satisfaction degrees, after then discusses the audit work process and work results of audit quality factor system. Chapter 2 is the literatures review that the influence of accounting firm scale to audit quality. It discusses the general research of auditor size and audit quality and related research, that the scale with earnings management level, industry expertise, audit charge, and profession supervising.It thinks that auditor size and audit quality are the dialectical unification and close combine. Chapter 3 is the regime and theories of influence about auditor size to audit quality. It indicates that input and output of benefits, technical progress and talents accumulation are two aspects which promote auditor size based scale economy theory.At the same time, the formation of audit quality requires signal discernment and compulsory legal deterrent based reputation theory and "deep pocket" theory. In addition, the auditor behavior based "bounded rationality" theory provides the foundment of audit quality management leaks and supervision model reforms. In Chapter four, it tests the difference audit quality in different auditor size and the major differences influence factors with the panel data Logistic model and linear model. Chapter 5 is the audit quality with the auditor size changes of accounting firm. It tests the vary of audit quality with customer increase or decrease selection and audit quality control orientation thrugh panel data Logistic model and linear model. In Chapter 6, it is discussed the conclusion of the study and policy Suggestions. It generalizes the basic conclusion, and puts forward the specific measures and suggestions, as well as the limitations of this study and further research direction.The main conclusions are as follows based this research:1. Chinese auditor size and audit quality are correlated and significant, but the influence of auditor size to the audit opinion types and earnings management degree is inconsistent. Earnings management level in general presents significant reverse correlation with the auditor size.lt indicates that CPA firm’s earning control degree will increase significantly when the auditor size is bigger, but the effect of auditor size to the audit opinion types is not significant when audit charge exists.When eliminates audit charge influence, the effect of auditor size on the audit opinion type is significant correlation, and the Big Four have more inclined to standard opinion types.Exclusion of some causes, it argues that"opinion purchase" phenomenon of auditors opinion type choice still exists.2. The influence on audit quality of different firm scale is diverse, and each has advantages and disadvantages. The "Top Ten of native" opinion type is controlled stronger by education degree and experience level, but "Big ten" and "Big four" reflect variance phenomenons which are different from expectations. No matter which kind of auditor size, the audit quality management still needs to strengthen, and the larger scale may not the higher audit quality.3. Talents accumulation and technical advantages based on auditor size in China reflect insufficiency universally in audit quality formation of public accounting firms. "Big but not strong" and "big but not specialized" in China still remains; it is not bigger scale that its industry expertise and talents advantages are stronger. Therefore, we need to adjust excitation and guideline mechanisms, reform the personnel introducing mechanisms, supervision and management methods, as well as evaluating systems.4. The auditor’s limited rational behaviors, as well as low level and different profession supervising and punishment will offset quality growth brought by the auditor size under different interests’interference. It is necessary to improve the fairness and restriction of industry supervision and punishment, strengthen the interests of the local branchs and its quality inspection and management, enhance the self-sanction of reputation mechanism and brand mechanism, reform rational limited guidance incentive and evaluation to accounting firms and auditors.5. The discrepancy trend of audit quality is obvious, which caused by different auditor size.Since market mechanism in China is same, "pure and specialization" mechanism needs to be further improved with existing auditor size.6. The auditor size vary of the same accounting firm has certain adjustment tendency on audit quality control, while still exist some risks. One is the adjustment of audit opinion type’s choices which are not obvious, but consistent in high audit fee and standard opinion type’s reports after auditor size vary. Another is the adjustment tendencies of earning management control which are obvious, but different in customer financial risk control, with significant potential customers risk proble as well. In addition, the leading firms in scale change are inconsistent in non-standard opinion types of audit reports; there is no stronger tendency indication of leading firms in earnings management controlling after scale change, relative to the non-leading.