Research On The Influence Of Senior Executive Change Of Listed Company On Auditor Risk Response

High-quality financial reporting information is a prerequisite for the normal and efficient operation of the capital markets.As the supervisor of information transmission between listed companies and the capital market,the auditor's strong guarantee of the authenticity and reliability of financial statements can reduce the degree of information asymmetry between investors and listed companies,thus improving the operation efficiency of the capital market.Since the financial report of a listed company must be audited by an accounting firm before it can be disclosed to the public,the audit quality has a great impact on the authenticity of the financial information of the listed company,and a high level of audit quality can effectively guarantee the reliability of the financial information in the capital market.However,the role of auditors and the quality of their work are sometimes questioned due to the frequent financial scandals and accounting misstatements.In 2006,China established a risk-oriented audit model in the Audit Standards,and at the same time,the relevant legal supervision and punishment system is constantly improved.The auditor issued an inappropriate audit opinion if the audit failure will be punished by the regulatory authorities and be liable for compensation.Therefore,auditors need to assume greater responsibility for the audit opinions issued.If the auditor issues inappropriate audit opinions,it will not only affect the true reliability of financial information in the capital market,but also bring great negative impact to themselves.The audit business risk of the auditor comes from the major misstatement risk and operation risk of the enterprise.Under the modern risk-oriented auditing model,auditors should pay attention to those matters and risk scenarios that may threaten the production and operation of the enterprise.Only when auditors can identify the factors or situations that lead to major misstatement risks and operational risks of listed companies,and deal with them effectively in the audit work,can they reduce their own audit business risks,ensure audit quality,and realize the function of information quality supervision of auditing in Capital Market.The factors or situations that can lead to major misstatement risk and operating risk of listed companies are complex and changeable.In recent years,the senior executives(chairman and general manager)of listed companies have changed frequently.The change of senior executives will not only bring about the improvement of the earnings management level of enterprises,but also lead to the increase of strategic adjustment.The increase of enterprise earnings management degree and operating risk will improve the possibility of material misstatement in financial statements,and they not only reduce the quality of financial information of enterprises,but also improve the audit business risk of auditors.Auditors,as an independent third party to verify the financial reports of listed companies in the capital market,can they identify the audit business risks caused by the change of senior executives and effectively deal with them to ensure the audit quality? There is currently a lack of literature on this in-depth study.Based on the actual audit business process and the understanding of the auditor's risk response measures from existing research,the auditor's risk response measures are reflected in the adjustment of audit fees,audit input and audit opinion types.Therefore,this paper discusses the following three issues: Firstly,whether the executive change of listed companies will increase the audit fees,that is,whether the auditor can identify the audit business risks caused by the change of senior executives and increase the audit fees.Secondly,whether the change of senior executives will increase the audit investment,that is,if the auditor charges more audit fees in the audit business of the change of senior management,whether they actively carry out more audit work efforts to effectively reduce the audit risk,or the high fees only become the economic compensation after the increased risk.Thirdly,whether the change of senior executives will encourage the auditor to issue non-standard unqualified audit opinions,that is,whether the auditor can finally issue appropriate audit opinions to ensure the audit quality and reduce their own audit business risks under the risk situation of senior executive change.After theoretical analysis and empirical test,this paper has found that:(1)Changes in executive management can significantly increase the auditor's audit fees.When executives change,due to the increased risk of the audit business,whether auditors increase audit work or charge more risk premiums,audit fees will increase significantly.(2)When faced with the high-risk situation of executive change,auditors followed auditing standards and increased audit effort and audit time while increasing audit fees,rather than passively increasing audit fees just for risk compensation.(3)Changes in senior management have prompted auditors to issue more non-standard unqualified audit opinions.When auditors identify the risks brought about by changes in the top management of listed companies,they will increase audit input,which is effective and ultimately reflected in issuing more cautious non-standard unqualified audit opinions.(4)Further analysis found that auditors will take more stringent risk response to the change of senior management of listed companies that are not state-owned,have low internal control quality,and have weak product market power,which is reflected in more significant increases in audit fees,increased audit investment,and issuance of Non-standard unqualified audit opinion;media attention will affect the auditor's adjustment of audit fees and audit input in the executive change business,but will not affect the audit opinion issued.(5)In the path analysis,the results show that the earnings management and the degree of strategic adjustment play a partial intermediary effect in the relationship between the executive change affecting the risk response of the auditors.Based on the theoretical analysis and empirical test of the impact of the change of executives of listed companies on auditors' risk response,the main suggestions of this paper are as follows: Firstly,after the change of senior executives,listed companies should pay attention to the supervision of senior executives and effectively exert the company's governance system,so as to restrain the profit manipulation behavior of senior executives,ensure the quality of their own financial information,reduce the risk of auditors to them,and ultimately reduce the adverse impact of executive change on the company.Auditors should pay close attention to the risk scenarios that may lead to material misstatements of listed companies,so as to respond effectively to reduce their own audit business risks.Secondly,when making investment decisions,investors should consider the impact of risk events such as changes of senior management on the quality of financial report information,and at the same time,based on the auditor ' s fee adjustment,the type of audit opinion,and other relevant information to make appropriate investment decisions.Finally,the regulatory authorities should continue to improve the information disclosure system of listed companies,increase the supervision of the legal compliance of listed companies,and at the same time,strengthen the supervision of the audit work quality of accounting firms,and improve the punishment of audit misconduct.