Auditor Client Importance And Audit Quality

Audit quality is the life and the foundation of the audit. Audit quality depends on the auditor's professional competence and independence. Many western studies found that the client importance will threaten auditor independence, thereby affecting quality of auditing. However, given our special institutional background, whether foreign-related research conclusion is applicable to domestic audit market, namely whether client importance on special client will hinder auditors issued a going concern opinion, and thus affect the quality of audit when their customer are financially distressed. Existing research does not fully domestic.On the basis of reviewing the literature in domestic and abroad, this research uses a large sample of "A" share listed companies of 2006-2009, uses going-concern to be a common proxy for audit quality, examining the relation of economic dependence and audit quality of accounting firm. However, despite the going-concern opinion as a proxy for audit quality is common in foreign literature, but whether it can effectively reflect the audit quality in China? Current literature is not sufficient. Therefore, before the test whether client importance can affect audit quality, we first explore whether going-concern opinion elaborate the company's warning function in China capital market, to determine whether the going-concern opinion with information content.Our finds are summarized as follows:(1) from the point of view of company, the going-concern opinion on bankruptcy can increased the amount of explanatory power, which means that kind of auditor opinion can forecast the company's finance stressed. (2) the higher the degree of economic dependence on the specific client, the auditor will be less likely to issue going-concern to such client in order to treat them favorably. But the conclusion of the study is limited to the angle measured from the assets, when measured from the perspective of audit fees, we did not find the client importance can impair auditor independence, which means the CPAs firm's reputation protection and litigation risk dominates client importance on important clients, under this two methods,the relationship between client importance and audit quality is not entirely consistent. These results suggest that the going-concern opinion have long-term effects, which can warning listed companies'financial crisis; and the economic dependence will have a negative impact on audit quality. Therefore, on the one hand, regulatory departments should enlarge the scope of information disclose in order to be better measure the accounting firm's client importance on a specific client, on the other hand, regulatory departments should strengthen supervision, improve the civil liability of accounting firms, improve the firm's non-compliance costs, perfect compensation mechanism to promote the healthy development of the audit market.