Studies On Audit Quality Of Chinese Listed Companies

In the beginning of the 1980s, Chinese government has resumed certified accountant's system to meet the open policy and the need of development of the Sino-foreign joint ventures. With gradual setting-up, the reform of the state-owned enterprise and flourishing development of the security market in the market system, the demand for auditting and discerning of the Certified Public Accountants (CPA) has been increasing over the last two decades. CPA play an important role in the economy to keep national macro policy implementation, maintain capital market operation, and protect investor interests of the public. During the economic transition period, the stock right structure of listed companies may be unreasonable, relevant legal systems may be not perfected, the incident of financial fraud have frequently occurred. CPA has become the accomplice in some extent in helping the companies to do so. CPA's independence, auditing quality hence have been incredulous and criticized.With the the accounting system open to the world, and the national overall open policy, the auditing quality of the listed companies becomes the focal point of the competition that the foreign auditior firms competes with domestic auditior firms. Facing such competition, keeping independence and improving the quality of auditting have been becoming more important in the need of solution to keep a sustainable, healthy development of the auditior firms. Researchers are still have relatively little knowledge on this issues, and governement also need in-depth studies for its policy designing. It thus will be very useful to study the mechanism of improving auditting quality and the criterion of quality.This paper is an attempt in exploring the basic theories and empirical issues on audit quality of listed companies in special institutional background of China economic and security market. The paper will employ research methods such as document review, problem presentation, statistical description, statistic tests and econometric model and other methods. Firstly, it uses theory of stakerholders to analyze the conception of independence of audit and of audit quality. It puts out earnings management is the efective evaluating standard of audit quality of listed companies in China. It does empirical study to verify earnings anagement of listing companies. It tests the four hypotheses empirically. It selects all listed companies and their auditors in China's stock market from 2002-2003 as the sample of the study. It puts forward practical methods to improve and guarantee the audit quality of listed companies.The paper is divided into five chapters. The first chapter introduces the studied problems, objective, data and methods, organizing of the paper's content, the main creative points and problems needed further study. The second chapter defines audit and audit quality, analyses factors that will affect the audit quality. The third chapter introduces motivation of earnings management, means of earnings management and confirms earnings management in empirical study. The fourth chapter comfirms the audit report modification in order to evaluate the audit quality. The fifth chapter summarizes all viewpoint and gives a set of policy suggestions.