Independent Audit Study

The thesis analyzes Chinese practical matter of independent audit by applying the modern economic theory. This paper consists of five chapters. Chapter 1 is the theoretic base of the thesis, presenting the agency problem and economic result of independent audit. Independent audit is a useful tool to resolve modern enterprises agency problem. Chapter 2 is an analysis of the information asymmetry, market failure, the economic grounds of regulation on market entry and the advantages and disadvantages of permit control. On the basis of the above discussion, conclusions are drawn and constructive recommendations are made. Rank management, which Mr. WangShanping has presented in 2001, may be a new method to resolve above problems. In chapter 3, after studying the problem in the domestic audit market, we put forward the way to construct effective market structure in our country. In chapter 4, unsolved problems in domestic independent audit profession and some opinions and ways to resolve these problems are presented. Then, after an analysis of audit contracts and audit demand, we discuss how to choose the form of business organization after the first reform in the audit profession by applying .agency theory. We think the form of accounting firm should be partnership------LLP or CP. It is the reason that there exist risk of audit agency and thecharacteristic of capital agency and the characteristic of capital composition in accounting firms. Finally, tentative plan about second reform in audit industry is presented in this part. Chapter 5 expounds that accounting firms are the micro-foundation of audit profession. It is very important for accounting firms to improve business management and efficiently control business risks.