Study On Relationship Between Ownership Structure And Audit Quality Of Chinese Listed Companies

Along with a gradually improving and building for socialist market economic, State-owned enterprise reform and the prosperous development of the securities business, there is a growing demand for audit. Audit plays increasingly important role in implementing the macroeconomic regulation and control policy of the China, cultivating the healthy and orderly capital market, and protecting the interest of most investor. However, the unreasonable equity structure of the Chinese listed company and the imperfect of law and regulation resulted in many finical frauds of listed company exposed frequently in recent years. Due to this, the independence of Certificated Public Accountant (CPA) and quality of the auditing caught much attention and challenge. Therefore, the research about the character of equity structure and the mechanism formation of the listed company and the effect on the independence of the audit, audit opinion, the selection strategy of audit authority, are theoretically and practically meaningful in improving and improving the quality of the audit and building up the governance structure of listed company.This article described the relevant theory between the audit and equity structure, analyzed the equity structure and the audit opinion of the listed company in China during 2001-2006. The Empirical Analysis in this article including two parts: one is the equity structure and the audit opinion, the other is the effect of equity structure of listed company on the selection strategy of audit authority. In the first part of the empirical analysis, we analyzed the audit quality and the standard of the audit quality, chose the gold standard in the empirical analysis. With the assumption that the audit authority issued the non-standard audit opinion was high quality, we took the type of the audit opinion as the substitution variable of audit quality, then used the listed company during the 2001-2006 as the research samples to construct the regression model which took the audit opinion , the shareholding ratio by the 5 larger shareholders, combined control ability, the top 1 equity-type, previous audit opinion, the scale of the listed company, financial leverage and financial irregularities as the Explanatory Variable too. Finally, we analyzed the model by SPSS13.0.In the other part of the empirical analysis, we firstly presented the mechanism of demand of the audit, the relation between the scale of the public accounting firm and audit quality, and proved that it could take the public accounting firm as the Explanatory Variable of the audit quality. We constructed a regression model which took the selection of audit authority, the shareholding ratio by the 5 larger shareholders, combined control ability, the top 1 equity-type, "two in one", the proportion of independent directors, financial leverage and financial irregularities as the Explanatory Variable. Finally, we analyzed the model by SPSS13.0.With the empirical analysis of the two standard of the equity structure and audit quality which including audit opinion and scale of the audit authority, we draw the conclusion as fellows:(1) The equity of the listed companies was in the high degree of concentration.(2) Ownership restriction can obviously increase the audit equality. The results of the empirical analysis showed that the less shareholding ratio by the top 1 shareholder, the higher the combined control ability, and the higher probability the listed company issued the non-standard audit opinion. On the other hand, the less shareholding ratio by the topl shareholder, the more the listed company tends to select the high quality audit authority. And when the top 1 shareholding were non-state listed company, the audit quality was much better than the state listed company.(3) The perfect governance structure of the listed company helpful for increasing the audit quality. When the chairman of board of the listed companies did not hold a concurrent position of CEO and the proportion of the independent director were higher in the board of the director, the audit quality of these were higher.Based on these conclusions, we came up with some policy advices as fellows:(1) Corporate governance in the ownership structure should be optimized, fostering institutional investors and listed companies to improve internal control issues, the establishment of an effective mechanism of checks and balances equity by increasing corporate efficiency, improve audit quality, improve the generation mechanism of legislation directors, increasing independent directors The disclosure of information, increasing the number of independent directors in the board of directors in the proportion of independent directors improve the quality of chairman and CEO to avoid truly serve the unity of the two; foster effective market manager.(2) CPA should improve audit independence and audit quality, CPA audit mechanisms to play a real role in the external governance, remodeling CPA's image of "economic police".(3) Investors in the stock market there is a serious asymmetric information, in the judgement of the company's financial information when making investment decisions should take into account the existence of non-listed companies, listed companies on the Annual Report of the non-standard audit opinion was issued, as well as listed companies Annual Report and whether the large accounting firms audit.