An Empirical Analysis On Determinants Of Audit Opinion In A-Share Market

Over the past decade, various types of financial-fraud cases occurred both in China and abroad. Accounting firms served for these companies also bore an inescapable responsibility. Originally financial reports and audit reports are both important resource for investors to get information for investing decision. But under current situation can investors still trust the financial reports and audit reports? This paper aims to do an empirical analysis on the determinants of audit opinion, then establish a predictive model based on these factors, thus help the investors to learn if they can believe the reports or not. In addition, new accounting standards and new auditing standards implemented in 2007. this paper aims to discuss the impact of the new standards on securities market and auditing profession.This paper uses a combination of empirical and normative research methods. Firstly, this paper displays the theory of audit opinion, indicates the essence of auditing, the imbalance between the auditing supply market and auditing demand market, the necessity of predictive model. Then, this paper summarizes the literature on the determinants of audit opinion, on the predictive models. Then, this paper analyzes the listed companies' audit opinions in Shenzhen and Shanghai stock market in 2007-2009. divides the audit opinions into three groups-normal group, mild group and serious group, using Multinomial Logistic Regression to process the data. On the basis of the predictive model, this paper uses the data of 2010 in A-Share market to make clear the prediction accuracy of this predictive model. At last, this paper gives some suggestions for financial reports users and audit reports users. simultaneously points out the inadequate points and the prospecting points.The empirical results of this paper indicate that:financial characters, corporate governance characters and audit characters can significantly influence the audit opinion. Those factors of financial characters-Debt Asset ratio. Cash Flow Ratio, Log of Asset. Net profit:factors of corporate governance characters-Shareholding Ratio, Executives Pay:factors of audit characters-Previous Opinion. Log of Audit Fee, nearly eight factors influence the audit opinion.