Research On The Impact Of Audit Tenure On Audit Independence In China

The research about the relationship of audit tenure and audit independence can betraced back to the20th century60s. In the early21th century, it happened a largenumber of financial fraud cases which impelled investors to have little confidence inthe capital market. The U.S. congress passed the world-famous“Sarbanes-OxleyAct”(SOX) in2002. The purpose of the act was to enhance the disclosure of listedcompanies, as well as improve the accuracy and reliability of disclosed informationwhich could effectively safeguard investors’ economic benefits and restore theirconfidence. In the act, audit tenure as a measure to improve audit independence waslisted. Owing to this measure, the relationship of audit tenure and audit independencewas discussed by the whole society. So what kind of relationship exists between audittenure and audit independence in China? In this article, non-standard audit opinionsare picked out as the measures to represent audit independence on the perspective ofaudit risk. This article is seeking to provide assistance for the sustainable developmentof domestic markets through analyzing practical statistics.In this paper, we use the A-share listed companies as study sample and classify theaudit risk based on the public’s estimation. The relationship of audit tenure andprobability of issuing non-standard audit opinions can reflect the consequences thatthis paper tries to prove. The research model adopted is the binary logistic regressionwhich is applied to measure the categorical variable. It finds that the increase of audittenure is not the only reason that results the decrease of audit independence. Thecertified public accountant (CPA) is willing to balance the pressure from the clientand the public before making decisions. When the items included in the annualfinancial report may attract more attention from the public, the CPA will suffer morepressure from the public than that from the client. In this situation, the CPA will notbe affected by the client in order to keeping audit independence. On the contrary, ifthe public does not focus on these items, it’s easy to damage independence along withthe increase of audit tenure. In reality, how to availably increase audit risk and the force of regulation is the core to improve audit independence. The concrete measuresrelevant departments can take to strengthen the risk consciousness and improve theoverall auditing environment include increasing the supervision and penalties forillegal behavior.