Non-audit Services And Audit Independence Study

Certified public accountant (CPA) as a profession can be dated back to thefounding of the Scotland Edinburgh association of certified public accountant in 1853. Up to now, the great profession has a history of 150 years. In her long way of development, audit services have always been the core of CPA in a fairly long time, and are regarded as "the most principal factor and the most powerful engine for pushing CPA profession ahead (Lin qiyun, 2002 ) ". However, since 1980s, with the continuous development and improvement of economy, some subtle changes have taken place in the business structure of CPA profession-the steady increase of revenue percentage in non-audit services which gradually take the place of audit services as "leading role" in the business system of CPA. For example, from 1985 to 1995, the percentage of audit revenue in terms of total revenue in the world "big six" accounting firms dropped from 58% to no more than 46% (Du xingqiang, 2001). In1999, among the "big five" accounting firms, the percentage of audit revenue in Andersen, PwC, Ernst & Yong, Deloitte & louche, KPMG were 18%, 35%, 34%, 31%, 36% respectively. Non-audit services win the favor because of its rapid development and bring great concern of public. In the end, the related authorities have to step in because of the disputes of the profession and doubts of the public. In2000, with the active promotion of chief Arthur Levitt, SEC launched a spectacular campaign towards the revision of independence rules, which leaded to a war between non-audit services and the independence of CPA-the fuse of "independence war". In the end of 2001, Andersen suddenly collapsed and was excluded from the profession of accounting, so "big five" turned to "big four", which marked the climax of the"war". In July 2002, US government proclaimed the Sarbanes-Oxley Act restricting non-audit services in form of legislation, and other countries followed by.In the background, a comprehensive and systemic research on non-audit services in the view of theory is necessary and important. The argument includesthree parts followed:Part one is the outline of non-audit services. Firstly introduces the definition and category of non-audit services, then reviews the development history of modern non-audit services (from the end of 19th century to the mid-term of 1990s), finally taking the history for a mirror, explains the driving force of non-audit services from the macro- and micro- perspective.Part two is the core of the thesis. If we view the thesis in the time sequence (vertically) , the part actually is the extension of the brief history of the development of non-audit services. With the background of the status of CPA profession and non-audit services in western countries and with the material of the incident of Enron and Andersen, the part expounds the effect of non-audit services on audit independence from theoretic analysis level and practice policies level, at last comes to the conclusion: non-audit services is a "double-edged sword", which "advantage edge" and "disadvantage edge" will exert different influence on accounting firms in different phase of their development.Part three, on the basis of analysis of the status of non-audit services of our CPA, points out the development strategy of non-audit services in China; then explains the feasibility of encouraging and leading CPA in our country to develop non-audit services; finally puts forward the corresponding policies and suggestions. If we view the structure of the thesis by the clue of space (horizontally ) , the first two parts are analysis in accordance with "west countries", this part goes back to our own country at present.