Audit Market Concentration, Auditor Tenure And Audit Quality

Since the born of modern auditing, audit quality has been the focus of audit, especially after a lot of fraudulent financial reports in the world were revealed. Both auditing market concentration and auditor tenure are concerned as two facts to affect audit quality both at home and abroad, so many states implement a series of measures to improve audit quality, which included both adopted rotation of chief CPA and signature CPA's rotation, the statute of signature CPA's rotation was put into practice in our country. However, the audit market structure in our country is very different from developed countries, the auditing market concentration is lower than developed countries. These researches both at home and abroad are generally about auditing market concentration and audit quality or auditor tenure and audit quality, but there are a lack of the relation researches between auditor tenure and audit quality under special audit market structure.This thesis focuses on the concern about the relation of auditing market concentration, auditor tenure and audit quality, first, we summarize researches about the relation of auditing market concentration, auditor tenure and audit quality both at home and abroad, and then review related theory, ascertain basis concept, on this basis, we analyze the characteristics of our auditing market structure, at last, we select variables for positive research.This thesis selects 3040 samples between 2003 and 2007 from listed company statements to carry through positive research. The thesis is launched from the relation between auditing market concentration, auditor tenure and audit quality in full sample, and then work over the relation between auditor tenure and audit quality concerning the effect of auditing market concentration, and work over a grouping research by audit firm tenure. At last, this thesis analyze the relation between signature CPA's tenure and audit quality concerning the effect of auditing market concentration too, and work over a grouping research by the mean of auditing market concentration.From the result of research, we achieve some conclusions:(1)There is a significant positive correlation between auditing market concentration and audit quality. The higher is auditing market concentration, the better is audit quality. (2)The relation between audit firm tenure and audit quality manifests a significant positive correlation in full samples, but when audit firm tenure is shorter than 3 years, audit firm tenure and audit quality have not a significant correlation, in contrast, when audit firm tenure is longer than 3 years, audit firm tenure and audit quality have a significant positive correlation. (3)When we do not concerning the effect of auditing market concentration, the relation between signature CPA's tenure and auditing quality is Inverted U. But when we concern the effect of auditing market concentration, there is not a significant relation between signature CPA's tenure and auditing quality, expect in the group of big scale audit firms(audit market concentration is bigger than their mean), it is clearly that the relation between signature CPA's tenure and auditing quality is affected by the scale of audit firms.According to the result of research, we give some advises to strong audit quality in two ways:we must develop big scale audit firms to increase our auditing market concentration, and do not to put audit mandatory rotation into practice.