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China's Securities Market Auditor Change Analysis

Posted on:2004-11-13Degree:MasterType:Thesis
Country:ChinaCandidate:J WangFull Text:PDF
GTID:2206360092985240Subject:Accounting
Abstract/Summary:PDF Full Text Request
Auditing services on the capital market have changed a lot in recent years. At the turn of the century, a number of important cases on the auditing market have aroused public attention. More and more market participants have begun to think: To which extent can independent auditing guarantee the information system? To answer the question, it's advisable to conduct research on auditing changes. By doing so, we can further understand the relationship between auditors and listed companiesWhat's the aim of examining auditor switch? Management is likely to avoid unfavorable auditing opinions by changing incumbent auditors, which will undermine audit independence and quality. One hundred and ten firms that switched their auditors over the period 1997 to 1999 were sampled. Based on the method of describing statistical data, this study examines the characteristics of auditor changes, the determinants, underling unfavorable results and information disclosure and audit relationship. The author hopes to provide evidence and solutions for the normalization of auditing industry and improvement of information quality.This paper consists of five chapters.Chapter one summarizes the research achievements home and abroad. Accounting literature on auditor changes is well documented indeveloped countries. Auditing opinion, change in management, expertise of audit firms and the deterioration of financial health of clients have been documented as determinants for auditor change decision. Based on the current research, the author plans to discuss the characteristics, determinants and disclosure regulation and auditing relationship.Chapter two examines audit relationship between auditor and clients as well as the characteristics of audit switch on Chinese security market. The author finds Chinese audit changes are mostly audit dismissals. That rare auditors resign on our security market indicates that auditors are at a disadvantage position. Auditors are likely to give in and ally with clients to cheat. The direct consequence is to undermine the audit independence and audit quality. This chapter also includes the analysis of the characteristics of auditor changes on Chinese security market, which deems to be helpful to find out the determinants of audit changes.Chapter three mainly discusses the determinants of auditor switch of Chinese listed firms. The author finds that qualified auditor reports contribute to auditor changes. ST and PT firms are more likely to change their auditors than non-ST and non-PT firms. The author also documented a positive relationship between changes in the biggest stock holder and switching auditor. But, there is no evidence of relationship between issuing new stock and changing auditor. In addition, the chapter examines the audit opinions before and after auditor changes andconcludes that there is no evident improvement of auditor opinion in general. Some firms, however, did achieve favorable opinions by switching incumbent auditor.Since auditor switch has potential unfavorable influence, supervision authority should take measures to control the negative influence. On one hand, in order to help information users to identify the opinion shopping cases, it is imperative to strengthen the regulation and normalization of the disclosure of audit changes. On the other hand, authority should put emphasis on how to successfully check opinion shopping motivation of listed companies.Chapter four studies the regulation of auditor switch. The author chiefly discusses the disclosure of auditor changes, the improvement of Chinese audit market and communication between predecessor and successor auditors. This chapter begins with American regulation on auditor changes. Then the author examines Chinese current regulation on this issue and finds out many drawbacks, such as lacking of substantial disclosure, no regulation on the promptness of disclosure and poor communication between auditor and Chinese Securities Regulatory Commission. The author comes up with ideas to solve the above...
Keywords/Search Tags:auditor, audit changes, security market
PDF Full Text Request
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