An Empirical Research Of The Correlation Between The Earnings-Management Of The Listed Corporate And The Auditor-Tenure

Earnings management of listed firm and its endless problem are reached extensively in accounting academic during the last 20 years."Enron"in 2001 brings about a more controversy topic: how the auditor tenure acts on earnings management of listed firms, audit quantity and audit independence of professional accounting firms. The corn of this topic is whether the long auditor tenure will affect the check and supervision function about earnings management on financial statements of listed firms, which is concerned by professional auditor. The securities market of our country is a newly arisen market, which has its unique characteristics, in addition to having the commonness of all newly arisen market: the government oriented supervising mode, the group of the listed company consists mainly of state-owned enterprises; the audit service market dominated by audit consumers. All of these unique features make Chinese securities market different from other countries. Therefore, in China, research on topic concerning whether earnings management of listed firms is tied with auditor tenure and how to prevent and reduce such kind of earnings management to play the evolutionary role of professional accounting firms has its theory and application meaning.This paper is discussed with the beginning of the correlation of earnings management and auditor tenure, and then deeply explains the theory foot of earnings management, key reasons in special economic system, the factors reacting to the auditor tenure's exchange, the government supervision on auditor rotation and auditor tenure. According to the features of A-share stock market, we adopt cross-sectional Jones model to check up earnings management and test the close relevance of earnings management and auditor tenure with empirical method. The result of this test exhibits negative relation between earnings management and auditor tenure. Based on this, this paper point out that improving the strength of supervision on accounting firms and reinforcing the supervision and information openness upon audit tenure is one of the basic means to prevent and reduce the earnings management of listed companies.