The Research On Interacting Between Corporate Governance And Independent Audit

The continual financial scandals of listed companies around the world after the year2001, and the consequent bankruptcy of the relevant accounting firm draw all companies’attention to the company management and concern about the audit quality. In China, with the establishment of market economy and the expansion of capital market, the number of listed companies increases quickly, and their position and influence in the economic life are gradually increasing. The audit reports issued by an accounting firm, one part of the social credit system, also take an increasingly important social responsibility of supervision and verification. Meanwhile, with China becoming more and more integrated with the international economy, companies encounter many common difficulties either in corporate governance or audit services. As a result, corporate governance and audit services become the key and hot points of research which attract attentions of many theorists and practitioners from China and many other countries. People have realized the complicated environment changes in audit services they are facing, and the important effect that corporate governance has on audit services.At present, we are coming through the world economic crisis spreaded from the United State in2008. Although this crisis results from the burst of financial asset bubble, the universal dissatisfaction with the company’s executive compensation and the adverse of risk control for enterprises still issue companies a wake-up call on corporate governance. In such a turbulent market economy development pattern, the role the accounting firm played as intermediary agency in supervising and verifying company management, and its self control of risks become the problems needed to be explored and studies thoroughly at the moment.In the relevant research of corporate governance and audit services, most researchers did research on corporate governance of auditees, and concluded that companies should focus on corporate governance to improve audit quality. While others did research on the size, forms of organization, personnel structure, etc, of the accounting firm and their connection to audit quality, so as to explore the development pattern of China’s CPA industry. Taking the former research method as the main thread, this paper put forward a dialectic relationship between corporate governance and audit services, that is, not only corporate governance has great influence on audit quality, but also audit services accelerate corporate governance. By analyzing relevant data of listed companies in2010, this paper discovers a direct influence of the company administrative and board of directors on independent audit, and the failure of the board of supervisors to provide effective supervision. In China, more than80%accounting firms providing independent audit services currently adopts limited liability company form of organization, so the internal management problem of an accounting firm corporate also affects the development of independent audit. In terms of the scope of audit services, due to the increase of the current internal audit outsourcing and the increasingly close relationship between internal and external audit, it not only includes Independent Audit authorized by previous research, but also contains company Internal Audit which is gradually being enhanced.As for the research methods, this paper combines normative research and empirical study, with the normative research method being dominant to have a deep study and exploration of corporate governance and audit services, attempting to give a more comprehensive three-dimensional perspective on multi-level, multi-faceted interaction between corporate governance and audit services. This paper mainly focuses on the supply-demand relationship of audit services. Starting from the practical problems of function alienation of audit in corporate governance, the author clarifies the mutural relationship and interaction between the need of audit services and the subject who needs the audit services(related to the auditee) By learning the experience of corporate governance from abroad and development principal of audit market, the author proposes that auditee should focus on conducting audit engagement rights, to improve the internal institution arrangements, and increasing effective demand for independent audit. Accounting firm should take the advantage of second consolidation to complete its internal management and audit procedure, carry out the implementation of the relevant duty and right. Government and industry self-regulatory organizations should enforce strict monitoring system, severely punish those who violate the disciplines, and promote the establishment and development of a healthy and stable capital market and audit services market.There are six chapters in this paper. The first chapter is about the purpose and the significance of the topic. The author explains the writing thread and research methods, and defines the key points and its research scope. In the second chapter, the author summarizes the basic theories on the study of corporate governance, and subtotals the research findings of relationship between the present corporate governance and audit services, meanwhile, the author summarizes the relationship between corporate governance and independent audit, corporate governance and internal audit, accounting firm, audit quality and independent market structure. In chapter three, the author studies the interaction between the accounting firm’s internal governance and supply of audit services, proposes suggestions of standardizing organizational structure, unifying business management standards, and developing international-oriented talents and core enterprise culture. In chapter four, the author studies the interaction between corporate governance and audit need of auditee, proposes to improve the audit internal environment, clean the relationship of audit services, and strengthen the audit findings and other measures and suggestions. In chapter five, the author classifies and analyses the related data about corporate governance and development of firm for several years, uses the method of empirical study to verify the above result, and refines the concrete implementation of those measures proposed. In the last chapter, the author summarizes the whole content of this paper, conducts the key conclusions in the round, comments on the creation and weakness of this paper, and gives some suggestions on the development of corporate governance and audit services in China in the future.