Study On The Path Of Improve The Audit Quality In Listed Companies

Quality evaluation of independent audit is a theoretical issue with different opinions which are not really effective solutions. Study of its causes, there are lots of effecting and restricting factors of audit quality, and quantitative research is difficult to be effective. The issue of audit quality is concerned widely around the world, and research achievements of foreign scholars on independent audit quality contain a lot of high theoretical value. However, capital market development in western countries is long and relatively mature, while the development process of independent audit is short and bumpy mixed with much praised as blamed. How big the role of simply copy the results of West in analyzing China’s capital market is? We wonder. At this stage, most of the domestic study is based primarily on economy, accounting and auditing theory. Studies on independent audit quality use specification analysis as the mainstream, while also some scholars try using empirical methods on the exploration research. But the theory has not yet formed a system.Independent auditing quality evaluation is a theoretical issue that attracted a lot of different opinions but without an effective solution. This is because there are many factors which affect the auditing quality, so that quantitative research is difficult to be effective.Auditing quality issues attract the world-wide attention. Scholars abroad carried out valuable theoretical research on independent auditing quality. However, capital market in western countries experienced a long history to be relatively mature, while China’s independent auditing history is short and the bumpy track got mixed judgments. That’s why people express doubt about simply copying and following the western research results in China’s capital market. At this stage, most of the domestic researches are based mainly on economy, according to accounting and auditing theory, using standard analysis method to conduct an independent auditing quality research. Meanwhile, some scholars try to use the empirical methods on exploratory study to solve related problems of independent auditing quality of capital market, but there is still not a theoretical system to be formed.This paper uses a variety of research results of economic theories, tries a new perspective to re-examine the auditing quality evaluation criteria, analyzes factors that affect auditing quality, and expects a fair interpretation on factors that affected auditing quality. In addition, based on China’s capital market specific data, the paper uses empirical methods to carry out studies on path to improve the independent auditing quality. Through the above studies, this paper aims to form a theoretical research system and to find new ways to improve the independent auditing quality of China.This paper is divided into seven chapters as follows:Chapter Ⅰ:Introduction. This chapter includes background, research purposes, analyzing framework, research content, methods, shortages and innovation. It is the overall summary of the full paper.Chapter Ⅱ:Literature Review and Theoretical Foundations. First, the paper reviews domestic and foreign literatures about auditing quality, auditing quality evaluation criteria and other related documents in detail. Secondly, based on the literature review, the paper discussed the theoretical basis of the independent auditing quality, including:the transaction cost theory, contract theory, agency theory, corporate governance theory, game theory, information economics, the efficient market hypothesis and the theory of economic consequences etc., This lays theoretical foundation for empirical research in the subsequent chapters.Chapter Ⅲ:measure of independent auditing quality. Begin with the analysis on the content of independent auditing quality and features of auditing quality, this chapter, with a new two-dimensional perspective, re-examines the auditing quality evaluation criteria on the status of the independent auditing quality, namely:evaluating auditing quality in both listed companies’earnings management degree dimension and types of auditing opinion dimension and using public capital market data in China to carry out empirical research on characteristics of independent auditing quality in different industries, different times and different financial status.Chapter Ⅳ:the game analysis on factors that affected auditing quality. First, standard research method is used to discuss the auditing quality constraints, namely:auditing subject, auditing object and auditing environment. Secondly, after thorough analysis on game-theory relations between auditing subject, auditing object and auditing environment, the mathematical model on the independent auditing quality and its affecting factors is constructed to provide theoretical support for later study on paths to improve independent auditing quality.Chapter Ⅴ, path to improve auditing quality:auditing subject perspective. Chapter Ⅵ, path to improve the auditing quality:The audit objects perspective. Chapter Ⅶ, path to improve auditing quality:auditing environmental perspective. This part is based on the auditing market situation of China. Through the validation of correlations between the influencing factors and auditing quality, it analyzes the bottleneck to improve auditing quality and proposes theoretical solutions as well as operational recommendations to improve independent auditing quality of listed companies.The main innovations of this paper are:First, it re-examines the independent auditing quality evaluation criteria in the two-dimensional perspective. Auditing quality is social, hidden and subjective. It’s a fuzzy concept whose connotation is clear but extension is not clear, so it’s difficult to be measured. Begin with the solutions on the confusion about auditing quality features quantify the auditing quality, the paper combines CPA auditing opinions and earnings management of listed companies to re-examine the independent auditing quality metrics in a two-dimensional perspective.Second, the paper discusses the impact on auditing quality from auditing subject, auditing object and auditing environment in a game analysis method. The paper makes sure that the influencing factors of auditing quality are the premise of the following study which focuses on path to improve auditing quality. It constructs the game model about the influencing factors of auditing quality, auditing subject and auditing object in auditing environment. Through multi-stage dynamic game analysis, the paper discusses the main influencing factors of auditing quality and their formation mechanism, which provides a theoretical support for the study of effective path to improve auditing quality of listed companies.Third, the paper uses an empirical method to study impact on auditing quality from auditing subject, auditing object and auditing environment. Paper uses the size of accounting firms and corporate governance structure as alternative variables of auditing subject and auditing object to study how the audit subject and object can affect auditing quality. Second, since the institutional environment affects the auditing quality ultimately through its impact on the auditing subject, the paper also attempts to study the correlations of auditing institutional environment and audit quality.Assuredly, the paper still needs further improvements in the future, it mainly reflects in the following aspects:First, the use of cross-sectional Jones model on accruals calculation is not necessarily accurate, so the measure of the size of earnings management may be a little rough. While it cannot propose a more perfect model to replace the section Jones model, but if we can use other models to decompose accruals, we can also get the same result. To a certain extent, it can improve the convincing of paper conclusions.Second, the entry point to measure auditing quality is not satisfactory. The best angle to measure the independent auditing quality should be level of how auditing services meet the needs of decision-making. The paper, measuring auditing quality with matching relations between earnings management level and types of auditing opinion, more or less failed to focus on "audit services to meet the needs of decision-making level". The reason is that to build a whole picture of the needs, indicator measurement and data collection is extremely difficult. Therefore, paying more attention on investment decisions demand is the focus of future research.Third, evaluation on auditing quality can only be according to pushing down auditing findings. Theoretically, evaluation on auditing quality should base on the more direct evidence in auditing process. However, access to the auditing process data is very difficult, and that’s why we had to settle-based on the auditing results (the auditing opinions, earnings management) to push down the auditing process, in order to evaluate the auditing quality.