An Study Of Audit Reporting Decision For Discretionary Accounting Principles Changes

The main purpose of this paper is to research on the actuality of Chinese public`s changing accounting principle and auditor reporting decisions involving accounting principle change, as well as the factors that may affect auditor`s opinion. Till now, there are some studies on accounting principle changes and the determinants of auditor`s opinion, but the article that combines the two together is few. Thus we attempt to clarify these realistic problems by empirical research. In this paper, firstly the concerned theory on accounting principle change is discussed and the practice of accounting principle changes domestically and overseas is introduced. Then through the compare of reality and theory, the auditing is introduced into the discussion. Lastly the public companies that have changed accounting principle are examined for 1998-2002. The major empirical results are summarized below:Firstly, the main type of public companies` accounting changes is accounting estimates changing . Major changes are decrease, not increase the profits for the year of change. Second, the percent of auditor`s modified reports for discretionary changes is quite low. And the auditor is short of uniformity in making modification decisions for discretionary changes.Lastly, the determinants of audit opinion are profit effect of an accounting change, auditee finical statement, the result of outside intendance. And the profit effect of an accounting change appears to be the most primary factor considered by auditors in making accounting change opinion modification judgement. But the other factors as the auditor firm size, increase or decrease the profit, the motivation to change accounting principle have not significant influence on auditor`s opinion.