Political Connection And The Independent Audit Of Enterprises

The author of this paper believes that under current political and economic condition, especially from the view of effectiveness of contracts of auditing, the political connection decrease the effects of contracts of corporate auditing information, directly impact companies'requirements of independent auditing, and finally decrease the efficiency of the whole security market. From the empirical tests for private enterprises which are listed at Shanghai stock market and Shenzhen stock market, for the purpose of hiding the long-term profits from rent-seeking, a private company without political relationship will be more likely to hire the certified public accountants that are recommended or trusted by related governments to improve its reputation, to transmit a positive signals to regulators and capital markets, and to avoid regulation and decrease costs of social concerns from citizens. Moreover, compared with small accounting firms, the large firms will not be impacted by local political forces and then will publish objective reports because of their formal regulations, huge economy scales, abundant of customer resources, and the motivation of maintaining their own reputations. What is more, the political mechanism and huge profits are important reasons to drive companies positively build political relationships.The paper makes some innovations in the following aspects:First, the topic is about a new field where the author does some research about the relationships between political relationship and auditing. The research is based on the consideration about the relationship between choosing auditors and the quality of auditing. Second, the research uses structural models of social science area to analyze samples, completely restoring the complex relationships among parameters in the real world. To test samples, the author of this paper introduces compared groups to analyze the deep impact of political relationships in different districts and industries. Finally, the article uses standard that regulated organizations are permitted to review as parameter.