Empirical Study On The Relation Between Auditor Tenure And Independence Of Auditor In Chinese Listed Companies

There are increasing researches in domestic and abroad focusing on the relation between audit independence and the auditor tenure since 2002. However, results are seriously controversial. Purpose of this paper is to explore the suitable audit tenure, which contributes to maintain audit independence in our country applying approaches of empirical testing, and further offer valuable suggestion for the development of independent audit and supervision of stock market.Based on domestic and abroad reviewed results about the relation between audit independence and the auditor tenure and the definition of audit independence, we combine direct and indirect empirical test to study A-share voluntary auditor changes sample from 2002 year to 2004 year and the fraudulent financial reports from 1995 year to 2004 year applying pairs analysis and the Logistic regression analysis. Results indicates: (1) Fraudulent financial reporting is more likely to happen and further affect audit independence during short auditor tenure (3 years and less) and long auditor tenure (6 years and more) compared to medium auditor tenure (about 4 to 5 years). (2) It is more likely to obtain"clean audit opinion"by changing auditor and affect audit independence of post-auditors in some degree during short auditor tenure (3 years and less) and long auditor tenure (6 years and more) compared to medium auditor tenure (about 4 to 5 years).Therefore, we concluded that compared with shorter auditor tenure and longer auditor tenure, medium auditor tenure can promote rigorously independence of auditor and we proposed that some measures such as stetting up suitable low limit of auditor tenure should been taken to enhance supervision of stock market according to our results.