The Research On Audit Quality Of CPA Firms’ Change

The change of CPA firms in listed companies has been appealing the attention of the academia, regulators and the public. As the bridge of the relationship between "Financial Reports------CPA Firms------Users of Financial Reports", CPA firms plays an irreplaceable role. Once CPA firms is changed, it must cause people’attention and make them explore the information content.In recent years, along with the increasing number of listed companies, the phenomenon of CPA firms’ change is more and more. Lots of theoretical analysis and empirical tests have been done by researchers, such as the motivation and economic consequences of CPA firms’ change, and it has received great success. Through the literature review, we found that these studies about the correlation between the CPA firms’ change and audit fees, opinion and audit quality were mostly based on the perspective of CPA firms, but not of the CPA. It is noteworthy that the form of CPA firms’ change can be divided into two types, one type is that CPA firms is changed while CPA is not changed, the other is that CPA are both changed. The first type, which is called "work hand in hand", is very common in China’s securities market. Take the CPA firms of "Zhong Tian-qin" for example, who was revoked the professional qualitification by CSRC for illegal operation, among the63listed companies which were served by "Zhong Tian-qin", the number of companies who selected the type of "work hand in hand" reached21. So far as it goes, change of CPA firms based on CPA’s job-hopping is a blind spot of our legal system, and it carries unique information content and can cause many specific economic consequences.Firstly, we made our standard by injuding whether the audit clients will flow with the CPA, and divided the change of CPA firms into two parts that those flow with and the other, which were defined as change with personal relationship and the other. Then, based on the Asset Specificity Theory, Transaction Cost Theory, Human Relations Theory, we try to analyze the motivation of personal relationship. Secondly, based on different perspectives, we selected relative data from1998to2003, introducing personal relationship, choosing level of earnings management as the alternative indicators of audit quality, using descriptive statistic and multiple regression models to test the overall impact of CPA firms’ change on the audit quality, and the impact of personal relationship and its closeness. We find graphical and statistical evidence that the CPA firms’ change and audit quality’positive correlational dependence is significant, which illustrats that the level of earnings management rises and the audit quality declines. However, in the change-simple, the personal relationship and audit quality’negative correlational dependence is significant, which illustrats that the successive CPA firms can identify the information content of the special type change of CPA firms, and implements some effective measures so as to ensure the audit quality and its professional reputation. In the relation-simple, the closeness of personal relationship and audit quality’ positive correlational dependence is significant. Subsequently, we take sensitive test to ensure the sensitivity of our conclusion. Finally, relating to the deficiencies of existing regulations, we put forward certain proposals such as strengthen the standardization of the CPA firms’merging program, strengthen the vocational education and control policies. So as to complete the legal system, promote the healthy and orderly development of audit market, and then provide quality services for the construction of socialist economy with Chinese characteristics.