Empiircal Research On The Influence Of Non-audit Services And Audit Industry Specialization On The Audit Quality

This paper takes the A-share companies listed in two main boards of Shanghai andShenzhen from2008to2011as the researching objects, and uses DA (discretionaryaccruals) evaluated by Jones model with a revised section as the substitution variable ofaudit quality. At the same time, it applies the logarithm of the amount of non-audit fees andthe proportions of the non-audit fees in the sum of non-audit fees and audit fees to measurethe non-audit services. It also adopts the industry market model as the substitution variableof auditor’s industry expertise to test empirically the influences of non-audit service,auditor’s industry expertise and their combined actions on audit quality. The results showthat in the present stage of Chinese audit market, the non-audit services offered by theaccounting firm does not have significant effects on audit quality, and neither does theaudit’s industry expertise. However, when the both influences of the two are considered, itis found that the non-audit services offered by accounting firm with industry expertise canpromote the audit quality apparently.The Chinese government recently has introduced all kinds of measures to stimulatethe growth of accounting firm, which provide opportunities for their development.However, it is believed that in the market environment of fierce competition, theaccounting firms can not be expanded just for expansion. After all, their energy and abilityis limited and they are impossible to consider every aspect. Therefore, the accounting firmthat wants to stand out from the crowd in the competition has to offer the products andservices with differentiation. That is, its products and services should have thecharacteristics of exclusiveness. From the “top four” international accounting firms, it canbe seen that each one has its own industry expertise, which offers a clue for thedevelopment of Chinese accounting firms. The advantages should be fully analyzed tobecome an expert in one or several industries and form industry expertise. It is certain thatthe firms specialized in the industry are more familiar with the industrial background andthe industrial knowledge than those do not. This industrial background and knowledge canbe used in non-audit services and the “knowledge spillover” generated by non-auditservices can also be applied in the audit services, which has a function of mutualpromotion. The idea that the CPA (certified public accountant) can offer both audit serviceand non-audit service fits Porter’s thoughts of the three successful strategic thoughts:1）the cost leadership strategy. That the certified public accountant can offer both audit serviceand non-audit service, form economy of scale, reduce the cost and make his cost lowerthan that of his competitors;2) differentiation strategy. The firms of industry expertise canoffer services and products that other firms can not do to gain higher premium and moreprofits;3) the single goal strategy. The firms must focus on one market segment and applythe cost leadership strategy or the differentiation strategy in it.