Advertising Prohibition, Advertising Permission And Independence Of Chinese CPA

As an important part of social supervisory system, the role of CPA becomes more and more important in the developing process of market economy, especially in securities business. The frequent emergences of financial skullduggery of listed company indicate that the auditing service of CPA is of low quality.Improving independence of CPA is the main way to improve the quality of the auditing service. And it is also the target of CPA professional regulation. In order to improve independence of Chinese CPA, many authors put forward various suggestions except for propagation of advertisement. But advertising is one of the effective ways to improve independence of Chinese CPA.The article analyzes that advertising prohibition does not maintain independence of Chinese CPA but to damage independence of Chinese CPA both in theory and practice. After that, the article introduces reputation mechanism to discuss the importance of advertising. On one hand, the messages of CPA and accounting firm can be transferred effectively by advertising, which can improve reputation of CPA and accounting firm. On the other hand, the reputation of CPA and accounting firm ensures good auditing service and truthful contents of advertisement in order to maintain their reputation. Meanwhile, the article introduces the experience of American CPA obtaining the right of advertising. American empirical study finds that advertising does improve independence of American CPA. At last, some suggestions about advertising in CPA trade are given, besides other suggestions to improve independence of Chinese CPA.The innovations of the article are that discussing the harms of advertising prohibition to the independence of Chinese CPA and analyzing the importance of advertising in CPA trade from reputation. Advertising prohibition is not beneficial to the independence of Chinese CPA both in theory and practice. First of all, advertising takes the function of build and improve the reputation of CPA and accounting firm. And then their reputation can help clients to evaluate the quality of the service and urge CPA to provide good auditing. Furthermore, the reputation of CPA and accounting firm is the collateral of advertising. Once there are spurious and misleading factors in advertisement, reputation of CPA and accounting firm will be destroyed. Therefore, reputation mechanism can certify the truthfulness of the contents of the advertisement.