The Influence Of Auditor Change On Accounting Conservatism

In recent years, with the development of Chinese capital market, more and morecompany choose to change their auditor. This phenomenon has aroused widespreadconcern from regulatory agencies, academia and practitioners. People not only care aboutthe event itself, but also concerned about the behavior of auditor changes might be anegative impact to information users and cause an unfavorable economic consequences.This paper studies the replacement of the auditor influence accounting conservatism.This article selected financial and market date5024companies in Chinese stockmarket from2007to2010, after the implementation of new accounting standards. Itimproved the Basu model to test the relationship of auditor changes and conservatism.The study found that, changes of auditors and accounting conservatism negatively related,that is to say auditor changes will reduce the listed company’s accounting conservatism.Then, according to the nature of the first controller, the sample is divided intostate-controlled listed companies and non-state-controlled listed companies, and testedtheir accounting conservatism. Experimental results show that all of them emerged asaccounting conservatism, but non-state-controlled listed companies accountingconservatism is stronger than to state-controlled listed companies. Based on the abovestudies, this paper examined the impact of auditor change on the conservatism oftate-owned holding companies and non-state holding company. It was found that auditorchanges have a significant negative impact on non-state holding company’s accountingconservatism, but the influence of state-owned holding company’s accountingconservatism is not significant.In addition, the sample was divided into ST companies group and non-ST companiesgroup, and examined the auditor change on the conservatism separately. The study foundthat auditors change have a significant negative impact on the conservatism of the non-STcompany group, but the negative impact on the conservatism of the ST company groupwas not significant.Finally, In addition, we adopted the accrual-cash flow model to examined the aboveconclusions separately, and draw the same conclusion.