An Empirical Study Between Audit Market Structure And Audit Quality

In recent years, the cases of auditing irregularities occurred one after another, people has shown an unprecedented concern about the Certified Public Accountant industry, how to improve the audit quality followed become the focus that is concerned in China, even in the world. The level of audit quality as a standard of performance evaluation of audit industry,is a major issues of the life and death related to the CPA industry. What kind of audit market structure should be established and how to improve the audit quality are the purposes of this research.This paper use both theory analysis method and empirical analysis method, separately from the audit market concentration, the audit firm industry expertise and the auditi firm size to study their impacts on the audit quality. The data is based on the 1245 listed companies in 2008.In addition to the introduction, the article is divided into five parts. The introduction introduces the background and the significance of the research; In the first part, we review the literature over the audit market structure and the audit quality, make a survey of the correlation between the audit market structure and the audit quality. In the second part, we analyze the impact of audit market structure on audit quality in the aspect of the theory; In the third part, we analyze the impact of audit market structure on audit quality by the empirical study; In the fourth part, we get the results of the empirical study and analyze the results; In the last part, we present the final conclusions and provide some recommendations.The article use the absolute of discretionary accruals to instead of the audit quality and use the three factors of audit market structure that are audit market concentration, audit firm industry expertise and audit firm size to analyze their influences on the audit quality by empirical model. In final, we get the conclusions as follows:First, the audit market concentration is positively correlated with the audit quality. A high concentration of audit market will alleviate the over-heated competition, so that the accounting firms will spend more energy and financial resources in the course of audit activities. Dutifully improve the audit quality.Second, the audit firm industry expertise is positively correlated with the audit quality. The audit firm industry expertise represents the professional skills of auditors. The Certified Public Accountants who have industry expertise will be easy to find problems in the audited company, so that it can prove the audit quality. Third, audit firm size and the audit quality have a positive correlation.This study shows that in order to improve the quality of practice in China's audit market, we should increase our concentration ration, under ensuring the independence of accounting firms to premise and encourage the firms to further develop their industry expertise. Done bigger and stronger!...