An Empirical Research On The Audit Client's Importance And The Auditing Quality

This research is based on the investigation of present situation on Chinese auditing quality, and examines the empirical relationship between the audit client's importance and auditing quality . No matter the correlative institutions'investigation results or the scholars' research results all indicate that the auditing quality present in our country are still in deep winter season. The reasons that cause the low auditing quality are various, the listed companies,CPA firms and regulators all should take on this responsibility, but the most important reason is economic incentives. The existence of economic incentives reduces the auditor's negotiated strength in front of the audit client. When the audit client's importance increases, that is to say the auditor's negotiated strength improves, the auditor as a rational economic man is likely to pursue his benefit extremely farther, sacrificing the auditing quality——reporting favorably to more important client. Only when the negotiated balance inclines to the auditor, can the auditor maintain the independence and guarantee auditing quality. Based on the data of 2002 financial reports of the listed companies and mutiple variables regressive model, after eliminating the financial category listed companies, IPO companies and the negative net assets of the companies, we conclude that the auditing quality of the CPA firms in our country is increasing generally, and the increase of the audit client's importance does not damage the auditing quality; with the increase of the audit client's importance, the auditing quality in the big CPA firms goes well, while the auditing quality in the small CPA firms goes bad regardless of the audit client's importance is high or low. This empirical result support for the auditor's civil liablity realization; whereas the big CPA firms have high auditing quality, it should support and restrict the mergence of the CPA firms, reduce the malignant competition and develop the audit market environment at present to benign direction.The innovations : 1,research method, the use of empirical research method for the empirical relationship between the audit client's importance and the...