Study On The Relationship Between The Signature CPA Rotation And Audit Quality

The quality of auditing will be impacted by auditor's independence and the professional of auditor. When Enron, WorldCom and other financial fraud took place, more and more countries started to pay attention to auditor rotation system to avoid long term damage to the independence of audit and thus affect the quality of auditing. At the same time, the research on the behavior of auditor rotation has been academic hot spots. Since January 1 in 2004, China has been implementing mandatory rotation system by signed certified public accountants for 6 years. How effective the implementation of this system and what impact on the quality of our audit still remains to be tested.This paper analyzes the changes caused by CPA signature factors and the positive and negative impact on quality of auditing, proposed hypothesis that rotation of the signed CPA can improve the audit quality. This paper use the absolute value of discretionary accrual proxy for audit quality, studied the impact of rotation of the signed CPA on the quality of independence by using 2004-2008 listed companies in china. As a result, we found that the signed CPA can help to improve the quality of audit, but the effect was not significant. The reason, found that as a CPA can be divided into two signature rotation and one rotation. The audit quality of two rotations is negative, and one rotation is positive. The overall impact on audit quality to combine the two methods together is positive. At the same time, it analyzed the effect of firm rotation and signature CPA rotation on audit quality is, the results show that the rotation of audit firms has the negative impact on quality, while the rotation of the signed CPA has positive effect on audit quality. This conclusion supported that the signature CPA rotation would improving the audit quality and provided some empirical evidence for sticking to and improve the regulation of audit rotation.