| CPAs have the title of "economic police",which is an important part of the national economic supervision system and the new social stratum,and an important force in building a community of social governance.The more the economy develops,the more important the audit becomes.The Party and the government continue to attach importance to and strengthen the role of CPAs as new social stratum in the political field and socio-economic development.Since December 2,2011,the united front work department of CPC central committee and the Party Group of the Ministry of Finance have issued the "Opinions on Strengthening the United Front Work of the CPA Industry",the number of CPAs elected as party representatives,people's congress deputies,CPPCC members has increased significantly.In academic circles,the political connections established by enterprises through actual controllers,senior executives who are elected party representatives,people's congress deputies,and CPPCC members are called political connections of representative committee.This type of political connection is a unique phenomenon in the context of China's political and economic system,and it is a reputation mechanism in itself.Scholars' research agrees that political connections have an important impact on social and economic activities.CPA auditing is an important institutional arrangement for national governance.The Party's National Congress system is the soul of the China's political system.The People's Congress system and the People's Political Consultative Conference system are important components of the national governance system.In the current context of promoting the “bigger and stronger” of accounting firms and the modernization of the national governance system and governance capabilities,combined with China's national conditions,it is of extremely important practical significance to study the impact of the political connection established by accounting firms through CPAs who are elected as party representatives,people's congress deputies,and CPPCC members.At present,most of the academic researches on political connections focus on the economic consequences of corporate political connections,and there are relatively few studies focus on political connections of accounting firms.The existing research literature on political connections of accounting firms was mainly based on the perspective of the connection established by the accounting firms' partners serving in the CSIEC(China securities issuance examination committee),which rarely involves political connections of accounting firms built through the representatives and committee members.Accounting firm is a special type of enterprise,and its audit behavior has externality,and the audit service products it provides have the nature of social public consumer goods,which determines that the accounting firm has dual attributes: economic and social attributes.The dual attributes of accounting firms determine that accounting firms should not only pursue economic benefits,but also social benefits.If an accounting firm wants to "grow bigger and stronger",achieve sustainable development,and better perform their audit and supervision functions,then both economic benefits and social benefits are indispensable.Therefore,this paper mainly examines the influence of accounting firms' political connections from the two dimensions: economic social benefits.First of all,from the perspective of economic benefits,economic benefits are affected by input and output.Due to the particularity of audit input data,it cannot be obtained through public channels.Then,this paper mainly examines the impact of accounting firms' political connections on the economy benefit from the perspective of audit output.The market shares of accounting firms and audit fees are the main manifestations of audit output.Therefore,this paper examines the influence of accounting firms' political connections on market shares and audit fees.Secondly,from the perspective of social benefits,the fundamental manifestation of accounting firms' pursuit of social benefits is the quality of audit services.Therefore,this paper examines the influence of accounting firms' political connections on audit quality.Therefore,based on the two dimensions of economic benefit and social benefit,this paper incorporates the accounting firms' market shares,audit fees and audit quality into a research framework,and deeply and systematically examines the consequences of accounting firms' political connections built through the representatives and committee members and its impact mechanism.The main research contents of this paper are summarized as follows:First,the impact of accounting firms' political connections on market shares of accounting firms.The empirical results of this paper are as follows:(1)The main research finds that there is a significant positive correlation between political connections of accounting firms and market shares,which is,political connections of accounting firms can significantly increase market shares.(2)Research on the impact mechanism shows that political connections of accounting firms can increase market shares by attracting more clients of state-owned enterprises,the acting path of politically connected accounting firms to increase market shares through rent-seeking activities has not been verified.(3)The heterogeneity test finds that regional legal environment enhances the positive correlation between political connections of accounting firms and market shares of accounting firms.(4)Both the provincial-level and national-level political connections of accounting firms have a significantly positive impact on market shares,but the national-level political connections of accounting firms have greater positive impact on market shares than the provincial-level political connections.(5)After accounting firms loss their political connections,the positive impact of political connections on the accounting firms' market share still exists in the short term.Second,the impact of accounting firms' political connections on audit fees.The empirical results of this paper are as follows:(1)The main research finds that there is a significantly positive correlation between political connections of accounting firms and audit fees,which is,political connections of accounting firms can significantly increase audit fees.(2)The research on the impact mechanism shows that political connections of accounting firms increases audit fees by increasing market shares,the acting path of politically connected accounting firms to increase audit fees by increasing audit input has been indirectly verified,the acting path of politically connected accounting firms to increase audit fees through rent-seeking activities has not been verified.(3)The heterogeneity test finds that regional legal environment strengthens the positive impact of accounting firms' political connections on audit fees;the importance of the clients has no significant impact on the relationship between accounting firms' political connections and audit fees.(4)The provincial-level political connections and national-level political connections of accounting firms both have significantly positive effect on audit fees.However,compared with provincial-level political connections,the national-level political connections of accounting firms have a greater positive impact on audit fees.(5)After accounting firms loss their political connections,the positive impact of political connections on audit fees still exists in the short term.Third,the impact of accounting firms' political connections on audit quality.The empirical results of this paper are as follows:(1)The main research finds that there is a significantly negative correlation between accounting firms' political connections and discretionary accruals,which is,political connections of accounting firms significantly improves audit quality.(2)The research on the impact mechanism finds that politically connected accounting firms improve audit quality by increasing audit input,improving accounting firms' industry expertise,and selecting low-risk clients.(3)The heterogeneity test finds that compared with the areas with poor legal environment,politically connected accounting firms have more effectively suppressed the earnings management behavior of listed companies in areas with better legal environment and improved the quality of audits;The more important the client is,the more cautious the politically connected accounting firms are in their practice,the more they will pay attention to earnings manipulation of listed companies,improve audit quality and reduce audit risks.(4)Both the provincial-level and national-level political connections of accounting firms have significantly improved audit quality,but there is no significant difference between the impact of these two levels of political connections on audit quality.(5)After accounting firms loss their political connections,the positive impact of political connections on audit quality still exists in the short term.The innovation of this paper is mainly reflected in the following three aspects:(1)Previous scholars' researches on political connections have mainly focused on the economic consequences of corporate political connections.The existing research literature on political connections of accounting firms was mainly based on the perspective of the connection established by accounting firms' partners serving in the CSIEC(China securities issuance examination committee),which rarely involves political connections of the representatives and committee members of accounting firms.Different from the existing research,this paper is based on the dual attributes of accounting firms,starting from two aspects of economic and social benefits,incorporates three aspects of the market shares,audit fees and audit quality into a research framework,deeply and systematically examines the consequences of political connections of accounting firms built through the representative committee members and its impact mechanism,which expands and enriches the relevant literature on political connections and audit of accounting firms.(2)The research in this paper finds that political connections of representative committee of accounting firms not only increase the accounting firms' market shares and audit fees,but also improve audit quality,which are helpful for accounting firms to achieve good economic and social benefits,and to achieve the unity of economic and social benefits.The research conclusions of this paper provide empirical evidence for the impact of CPAs elected party representatives,people's congress deputies and CPPCC members at the micro level.(3)The research conclusions of this paper have important practical significance: institutional reputation is as important as reputation from the market.Accounting firms should cherish and give full play to the institutional reputation obtained by the CPA's political identity of party representatives,people's congress deputies and CPPCC members,and promote accounting firms to be "Bigger and Stronger",achieve sustainable development;the government and regulatory authorities should further strengthen the guidance to the CPA industry representatives who have obtained the political status of representatives and committee members,give full play to their role as a "vane" in the CPA industry,improve the legal environment,and create a good practice environment for CPAs,give full play to the positive role of the CPA's political identity,improve the governance effect of CPA audits,promote social integrity,and promote the modernization of the national governance system and capabilities. |
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