An Empirical Research On Board Of Directors Characteristics And Audit Quality Of Chinese Listed Companies

In recent years, with the frequent exposure of the financial fraud at home and abroad, the credibility and independence of auditors have been concerned seriously by the public. CPA confronts a grim crisis for inferior audit quality. Under this background, many scholars have researched the solutions from the point of the CPA and the accounting firms, which are strengthening the building of professional ethics and legal controls and enhancing the quality of CPA. From a series of audit failure cases, we think that the imperfect Occupational Standard System of CPA and the relatively backward audit technologies are the factors of low audit quality. However, to solve the problem once and for all, we should explore fundamental causes from the system environment which restricts the auditors'behavior, and thereby improve corporate governance. The board of directors, as the link to the shareholders and the managers, is a key component in corporate governance mechanism. So, the degree of the board of directors'effectiveness will undoubtedly cause to different needs of audit services. This paper attempts to examine the relationship between board of directors characteristics and audit quality by theoretical and empirical research method, it will provide a reference to improve board system and audit quality.Based on the aspect of audit demander, this paper investigates the best board system and the approach of how to improve audit quality. Firstly, the paper selects a measurement indicator of audit quality, and defines the concept of board of directors, which is divided to board size, duality of board leadership, the proportion of independent directors, the establishment of audit committee, the frequency of board meeting, the lever of directors'shareholding and the age of directors. Secondly, on the basis of the literature review, the paper adopts Principal-agent Theory, Stewardship Theory, Resource Dependence Theory and Game Theory to analyze the impact of the board of directors on audit quality theoretically. Thirdly, this paper uses empirical research method to inspect the relationship between board of directors characteristics and audit quality, with the sample of A-shares Chinese listed companies in 2005. Finally, combining the conclusions and the problems which we find,this paper points out some policy proposals, including perfecting the company's board of directors, improving the external environment of board system and the auditors'appointment system.