An Empirical Research On The Auditor's Opinion Towards Accounting Errors

Although the accounting information disclosed system have been improving step by step under the exposed problems of the listed companies in China, the motivation of accounting fraud and earnings management can not be eradicated. In recent years, some listed companies have taken the risk of being punished to use accounting errors as a method to manage earnings on purpose, which causes serious accounting information distortion problems, brings massive loss for the general investors and has terrible negative influence on the Chinese Stock Market. Since the audit reports provided by the public accounting firms is one of the most important materials for investors to see the finance information, the aim of this paper is to make empirical research in order to find out whether the auditors in China are competent of disclosing the accounting errors when they happened.Based on the research findings by scholars in home and abroad, the paper discussed the system background and motivation of the accounting errors. Besides, it also gave a brief introduction of the relevant audit theory for our research. Then, the article chose some listed companies as our sample firms whose annual reports revealed accounting errors during 2000– 2003, and also analyzed CPA's audit attitudes towards the errors and the determinants of their attitudes before the accounting errors disclosed by the management. Results showed that the auditors were more likely to issue unqualified opinions to errors which were caused by the abuse of accounting policy and accounting estimate. What's more, the auditor was not consistent in making modification decisions on accounting errors. Then, the result of logistic regression showed that the effects of errors on profits, the business financial positions and the size of the clients were the main factors which led auditors to issue modified opinions. Besides, motivations of earnings management and the size of the CPA firms had an insignificant effect on the CPA's opinions. In the end, the paper gave some suggestions regarding improving our auditing quality based on our research.