The Nature Of Ownership, Big4Auditors And Earnings Management

Since entering the new century, the problem of Earnings management that managersmanipulated the accounting earnings information for private interests has becomeincreasingly serious, and earnings quality have been worried. The fatal cases like theEnron, WorldCom and "Yinguangxia","Zhengbaiwen" posed a grave threat to thehealthy development of the securities market, and made great harm to the economicinterests and confidence of investors. The events about earnings management causedthat more scholars focus on the research of restraint mechanisms of earningsmanagement such as corporate governance, internal auditor, and external auditor. Weinvestigated the inhibition of earnings management behavior of external auditor such asBig4Firms. Based on previous theoretical results this research made some theoreticalreference for future research, and there is strong practical significance in this article.Most foreign scholars think that large accounting firms represented by the "Bigfour" with higher audit quality, and audit quality is the same for all enterprises. However,this is corrected in the mature Western Securities Regulatory mechanisms and theperfect legal system contexts, whether the conclusion still holds in China is debatable.For this reason, from the perspective of the probility of issuing modified audit opinion、accounting conservatism、disclosure earnings some domestic scholars proportion toverified the audit quality of "BIG4"，and found there is no significant difference inaudit quality between "BIG4" and Non-BIG4in China, and the reason why they thinkso is that the external environment (such as practical risk) that BIG4faced is changedimpacted by Chinese special system, and ultimately led to the decline in the quality ofits audit.However, in the Chinese context, whether the company’s own characteristics (suchas ownership of nature) will be affect the audit quality of BIG4? Obviously, comparedwith the state-owned enterprises,Non-state-owned enterprises faced greater risk ofbankruptcy as well as more operating pressure，in addition that managers is moresensitive to salary incentive, and thus have greater earnings management motivation.Which may cause the inhibitory effect of BIG4on earnings management is more significant in the Non-state-owned enterprise. To this end, we make the following twoassumptions:(1) Without consider the Below-The-Line Items, the extent of earningsmanagement of State-owned enterprises was significantly lower than that ofNon-state-owned enterprises.(2) Overall, BIG4and non-BIG4show no difference ineffect on earnings management.When considered the nature of the ownership ofenterprises，the effect on earnings management of BIG4is significantly better than thatof Non-BIG4in the Non-state-owned enterprises，but show no difference in theNon-state-owned enterprises. In this paper, we chose the Shanghai and Shenzhen stockmarket listed company as sample to valid the assumptions above, and at last got theconclusions, and the conclusions is not changed when considered the accounting firmself-selection problem and new accounting standards issued problem.Empirical research required informative theoretical foundation and rigorousverification procedures. Then we arranged the structure of the full text as followed:Chapter One, the introduction section. Introduced the background and significance,methods and routes, possible innovation of this research. Chapter Two, the theoreticalbasis and the literature review section. Defined some key concepts at first andelaborated the theory that we applied, and summarized related literature nearly aboutthis study. Chapter Three, the study design section. According to scenario analysis putforward hypotheses and conceptual model, then defined variables and constructedempirical model of this basis. Chapter Four, the empirical analysis section. Processedsample data with the methods of descriptive statistics, univariate analysis, multipleregression analysis. Chapter Five, the conclusions and prospects section.Summarizedthe conclusions, and also pointed out the inadequacies of this article and proposed somesuggestions.