| As an essentially systematic arrangement to enhance the quality and reliability ofaccounting information of our listed company, independent auditing can help to protectthe interest of medium and small investors, also other information users. And it alsopossesses the function of optimizing the allocation of the resource in capital market andprotecting the running order of market economy. However, our auditing market is stillconfronted with many difficulties despite the stock market continues to develop andimprove. These difficulties include two aspects.First of all is inadequate spontaneous demand of auditing. In our country, under thebackground of economic transition and development of emerging market, the demand ofauditing mainly comes from the mandatory requirement of the governments instead ofthe automatic demand of the firms. This phenomenon directly causes not the qualitycompetition but the price competition of accounting firms.Secondly, though the structure of our auditing market becomes more stable, thecompetition is still severe and market concentration is relatively low. In such phase,accounting firms select to low the fee collected from the customers and relevant qualityof auditing not to unite other firms and keep the limit of auditing charge.So, our research will follow the clue as low price competition, price control andquality of auditing, and will answer four questions.1) Whether low price competition is existed in our auditing market?2) Whether low price will affect the quality of auditing?3)) whether quality of auditing will be enhanced under the price control ofgovernment?4) How to regulate and design the control system in order to guarantee the qualityof auditing?For question one, our research select279samples satisfying the requirement of lowprice competition in our listed companies and make empirical study, using the series ofdata from2002to2010. The result testified that low price competition is existed inour stock market.For question two, our research select the absolute value of discretional accrualprofits as the substitute variable of auditing quality, build up the regression model ofauditing quality and low price and make empirical research using the selected samples. The result is that the decreasing ratio of actual auditing charge is negative relevant withthe absolute value of discretional accrual profits. That is to say, auditing quality ispositive relevant with the decreasing ratio of actual auditing charge. In a word, lowerauditing charge than normal level will damage the quality of auditing.Then in order to research the role and affection of government control, we establisha evolutionary game, and analyze audit price controls from a new perspective through itas well as how to improve audit quality and found that:(1) so long as low audit feesstrategy can generate profit in the audit market, there will be at least one accountingfirm to select this strategy;(2)if the return of low audit fees policy generate is more thanhalf of the profit of the high charging strategy in the market, all the accounting firmswill tend to choose the strategy of low audit fees;(3) the only selection of promoting anaccounting firm to give up the low audit charging strategy is to make accounting firmswho adopt this strategy facing negative earnings. Therefore Audit price controls methodsuch as setting the audit fees limit will not help improving audit quality. Morereasonable methods to improve audit quality are to set more strict laws and regulationsand regulate the legal responsibility of the Certified Public Accountant. Under ourexisting legal system, we also need to reduce litigation costs and time of lawsuits andimprove the probability of accounting firm due to the low quality auditingaccountability.Then pointing at the result of game analysis, we make empirical research tosupport it.Firstly, for the relation of low-cost control and audit quality, we build up regressionmodel to testify whether auditing quality has been enhanced after government form therelative regulations of auditing charge control. And we found that government promotedlow-cost control cause that audit fees of listed companies improved, but the absolutevalue of the accrual profits did not significantly decrease, and the possibility of beingissued non Standard audit opinion did not increase, so we can find there were nosignificant improvement in the quality of auditing. Compared with the normal chargingstrategy, even if accounting firms who are apt to low-price competition charge more,there will be no significant improvement of the auditing quality. So we can say theeffect of government regulation is less obvious than expected in short-run. This outcomeis similar with the conclusion of game theory.In order to research how to make the specific regulation to increase the quality ofauditing, we make application of the result of game analysis and discuss the relationship between lawsuits cost and auditing quality. In2010, supreme people’s court formedsome regulations which significantly influence the auditing lawsuits cost. So we buildanother empirical regression model and the conclusion is that the YEAR variable isnegative relevant with the manipulated accrual profit, but2007accrual manipulation ofthe audited profit was significantly lower than in2006. This result also indicates that theimplementation of the Act No.12and the improvement of law suits cost in2007hasplayed an important role in some extent to enhance auditing quality and keeps the sametrend of game analysis.Through the theoretical and empirical analysis, we can draw conclusions thatmerely regulation of auditing charge collected is hard to improve auditing quality inessential, and more reliable suggestion is to enhance the lawsuits cost regarding to theauditing quality. So, new policies may be focused in such aspect,1) The integration of regulatory power, and improve the regulatory laws andregulations,2) Optimizing the governance structure of listed company and promote thespontaneous demand,3) Optimizing the structure of the auditing market and encouraging orderlycompetition. |
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