A Study Of The Effect Of The Merging On Audit Quality In Local Accounting Firms

Combination is the most effectual method of expansion, accounting firm could makerapid growth through this way, scalization is the direct result of merger. Facing the keener andkeener competition in the auditing market, in order to reply to the competition, localaccountant firms has to develop a bigger and better strategy. So, this paper analyzes the effectof merging on audit quality in local accountant firms from the view angle of intellectualcapital, and sum up experience from this wave of mergers, hoping to provide practicalexperience for future work.Tracing the history of the merger waves happened before, the paper briefly summarizethe characteristics of each wave, and the factors that leading the previous merge cases to badresults, we believe that too much intervenes from the policy、improperly benefit assignment、unsuitably development strategy and resources integration after merging，making localaccountant firms could not get strength enhanced in this way.In theory, firstly this paper explained the relation between merger and auditing quality.The semi-marketization merge acting in local accountant firms cannot totally use foreignresearch results for reference, but the enlargement of the scale brings benefits for localaccountant firms, such as improving employees’ professional eth、 guarantying theirindependence and trying to avoid lawful punishment. Secondly, we reviewed the studies ofthe relation between merging and intellectual capital. For intellectual capital is key factor forgain in this industry, local accountant firms can scale-up intellectual capital though merging,and it will beneficial for accountant firms to build brands、attract more large customers、andshare resources. So, after merging, the accountant firms can expand their coverage to a muchwider resources, and optimize the allocation of it, so, this way of thinking inspired us to dothis research from the view angle of intellectual capital. In a word, as far as the theoryconcerned, the merge acting will help to improve the audit quality of local accountant firms.On the base of theory analysis, we picked up eight merge cases among local accountingfirms from2006to2008in order to study the effect of merging on audit quality in localaccounting firms. We choose paired samples to void the influence produced by the newaccounting rule carrying out, and to ensure accuracy of test results. In empirical analysis, wefind that accounting firm mergers improve its audit quality by merging as time goes by. Itindicates that merges among local accounting firms present much more marketability thanpolicy leading effect year by year; also, as intellectual capital may significantly affect audit quality, we using cluster analysis method to divide the merging samples of local accountingfirms, and find the differences between them. After all, the paper maintains that, as localaccounting firms gradually arouse the awareness of increase its strength, and attaching weightto integrating, they are taking the advantages of intellectual capital. the research found that inmerged local accountant firms, intellectual capital has played an important and positive role inaudit quality improvement, With analyzing the function of in intellectual capital, we find thatthe local accounting firms which obtaining an advantageous position in intellectual capital orhaving its intellectual capital greatly improved though merging received a marked progress inaudit quality. In conclusion，based on the work and conclusions of this paper,we brought outsome merger proposal for local accounting firms.