An Empirical Study On The Auditor Switches And Litigation Risk

Foreign researchers found that excessive litigation risk will lead the change of auditors. In recent years, China has set off the wave of litigation against auditors. The increasing cases have effected the audit work. Whether the increased risk of litigation will lead to listed companies change auditors? The study of the issue have practical significance meaning on understanding of auditor change problem, preventing occupational risks of audit profession, improving audit quality and strengthen the protection of small investors.On the basis of reviewing important documents, author selected A-share listed companies as a samples of which annual Report was during 2004-2006 and occurrence of a change of auditors. First in accordance with the Notice, samples will be divided into litigation risk group and non-litigation risk group, and then combined China's specific conditions in reference to foreign research results, on the basis of this study identified measurable risk of litigation related variables such as: the scale of assets, inventory in the proportion of the total assets, receivables in the proportion of the total assets, ROA, liquidity ratio, assets and liabilities rate, sales growth rate, Beta coefficient, the ST, the audit opinion, we used Logistic Model to examine the relations of China's auditor change and the risk of litigation. The results showed that, the scale of assets, assets and liabilities rate, Beta coefficient, the audit opinion, whether ST, ROA these six litigation risk factors have a significant impact on the change of auditors; litigation risk has become auditors' one important factor for the changing.The main innovation of this paper is to learn from the results of both of foreign and domestic, to quantified litigation risk, and then further studies using empirical methods to examine the link between domestic litigation risk and auditor changing, which expanded the domestic research in this field .