Thoughts On Audit Tendering

With the economic and social development, the audit demand and the number of CPA are increasing. Audit tendering, a new way to connect the transaction's both sides, has been used by more and more business enterprises. In response to it, the CPA firms put their focus on it too.The CICPA has put forwarded two exposure draft, who intended to provide guidance to the CPA firms'tendering. Correspondingly, this January the Chinese Ministry of Finance issued principles on how to use audit tendering to entrust the CPA firms. Whether and how to make logic, operational and constructive regulations on it? It has been one of the hottest topics in accounting professional field.This paper reviews the evolution of the process of audit tendering and the related regulations in main developed countries first. Intending to highlight audit tendering in China, using the case research method, the paper makes an analysis to 110 audit tender notices, which appeared in the only domestic legal authoritative website from Mar, 2005 to Mar, 2006.The statistics reveals that it is the government departments and state-owned enterprises that use audit tendering most now. The political support and the special audit demand in China will make audit tendering more popular in the future. It also discusses the major problems disclosed in the application of audit tendering in China, i.e., (1)Most business firms have no incentive to use high-quality audit service, so price is more important choosing index to them than audit quality; (2)Under the competition pressure, with the market and legal failures, the CPA firms can not keep independence to afford high-quality audit service; (3)Abnormal government power over audit tendering process makes audit tendering tend to become a new political rent; (4)The lack of powerful regulation maker and uniform tendering regulations make current audit tendering fall into chaos.Furthermore, considering the situation in China now, the paper concludes to develop a preliminary framework for regulating audit tendering in China. Suggestions on regulation maker, regulation making procedures, regulation contents are put forwarded, i.e., (1)Strengthen governmental legislative regulations and set up specialministry to manage audit tendering; (2)Regulation making procedure should be public and open; (3)Develop true audit demand; (4)Promote CPA to supply high-level audit service; (5)Use two-steps tendering method and multiple-factors appraisal method.The innovations of the thesis are listed below. First, it analyzes cases to discuss the major problems disclosed in the application of audit tendering in China. Second, it tries to develop a preliminary framework for regulating audit tendering in China.