The Empirical Research Of The Influence Of Audit Market Structure On Audit Quality

With the development of capital market, more and more fraudulent financial reports were disclosed and more and more audit failure happened. Investors, people with related interests of listed companies and the public began to doubt the audit quality provided by accounting firms. In recent years, international accountant profession who was involved in false financial reports was often disclosed. It not only caused trust crisis to accountant profession but also made people doubt the alidity of audit market mechanism. Meanwhile, domestic audit market was not calm, and listed companies often provided fraudulent reports, while certified public accountants provided fraudulent audit reports for those reports. Those incidents not only affected certain certified public accountants and accounting firms, but also imposed negative effects on the whole accountant profession. Moreover, healthy relation between supply and demand was not built yet, low fees often took place in competition, audit fees couldn't reflect the value of audit, the signal transmission function was difficult to work, the government's improper intervention still existed and it was diffcult to build an independent audit market. Due to the problems above, we should adjust, improve and develop audit market from the perspective of audit market mechanism. We should also make sure the function of audit market could support the independence, objectivity and impartiality of certified public accountants.The purpose of existence of auditing at CPA firms is to improve the efficiency of capital market and to increase soicial welfare.To achieve the goal,the audit quality must be high.So the research of the audit quality has both theoretical and practical meaning. This paper which based on the theory of industrial organization thought that the audit market structure, conduct and performance affected the audit market structure and audit quality.The framework provided the ideas for comprehensive and systematic in-depth of China's audit market which we may refer to the study. This paper which is on the basis of this idea of empirical research, examined the structure of China's audit market in recent years and revealed the correlation between the audit market structure and gave relevant policy recommendations. Specifically, this paper mainly discusses the following five parts.The first section describes the background and the significance of this paper.In 2008, the U.S. economic crisis impacted China's capital market, making the audit market as an urgent research topic. In addition, the papers summarized the research results at home and abroad which mainly focused on the audit market structural position, the audit market concentration and the stability of market. They generally agreed that the audit market in China is still an immature market existing fierce competition.the current audit market structure is not effective market structure, but due to limitations of data sources, The research of China's audit market structure are not many.The second part analysed the audit market structure combining the audit market concentration, product differentiation and the audit market entry barriers in which the audit market concentration, the most commonly used measure is "four concentration" (CR4) and the "eight concentration" (CR8).However, compared to the U.S. audit market structure, the audit market structure in China is still a monopolistic competition model which is also distributed to the concentration of transition from the process. The auditor industry expertise and the audit market entry barriers also influent the audit quality.The third part analysed the definition and facters of the audit especially the impacts of audit market structure on audit quality. In general, the higher the degree of audit market concentration, the more customers they have, the higher the independence of audit, so the audit quality is higher. Similarly, the higher the level of the audit industry specialization to provide customers with differentiated product audit services,the higher the audit quality. The paper put forward the two basic assumptions.The fourth part based on the theoretical analysis selected large amounts of data from 2006 to 2008 of China's A share market to aggregate, classify and summrize. Through the analysis of these data, we found that the audit of China's A share market concentration is very low because of the excessive competition in the market, too small firms are too small and too serious regional factors. In addition, we used the company's annual financial report to measure the auditor's industry expertise for the industry. Empirical results verified the theoretical analysis of assumptions reasonably.At last, this thesis puts forward some suggestions which optimize the audit market structure to higher the market performance.The mail innovation points of this paper are as follow:(1) Analysed the relationship between audit market structure and audit quality systematically in depth;(2) Provided the latest empirical evidence for the relationship between audit market structure and audit quality;(3) This article also tested the combined effect of the auditor industry specialization and market concentration on the audit quality.