The Research Of Structural Changes And Their Incentives In Chinese Audit Market

Into the twenty-first century, China’s economy develops rapidly. As is known tous all that the audit market system is an important subsystem of the economic system,which can exert huge influence socially and economically. Thereafter the optimizationof the audit market has always been a major concern. Researches on the audit marketstructure have always been hot issues in the academia. This focus of attention is basedon the SCP framework generated from theories of industrial organization, whichdeclares that the market behavior determined by market structure would influencemarket performance eventually. In other words, the structure of the audit market willwork upon the competition and quality of auditing. From this common assumption,the researches on auditing structure are originated.In this field,the western academic community has worked Audit market structurehas worked the field for a long time. Their researches mainly focus on the issuewhether high audit centrality will disorder the competition in the market, therebyimpairing the effectiveness of auditing. However, these researches produces noevidence that high audit centrality will affect the effectiveness of auditing. In reality,the SCP framework generated from theories of industrial organization lacksapplicability in auditing and the competitions among big auditing firms are stillintense.Besides, Chinese researches show that the centrality in domestic auditing marketis not so high that it is actually in decentralization for quite a long time. Hardly isthere any domestic auditing firm coming to the fore that the four major internationalauditing firms are holding half of the auditing market in China. No domestic auditingfirms can generate the scale economic effect and reputation evaluating systemrespectively, which leads to various systems and policy that cannot benefit thedevelopment of domestic auditing market. Therefore in academia the urge ofestablishing oligopolistic auditing market as well as expanding the scale andcentralization of auditing market is overwhelming in expectation of promoting thecompetitiveness and facilitating the industrialization of domestic auditing firm.This thesis is designed to explore the evolvement in the structure of domestic auditingmarket and locate the driving factors behind these changes, which would be of greatsignificance to the development of domestic auditing market as well as theconstruction of CPA firms in China. To achieve these objectives, this paper willanalyze the structural changes and the corresponding driving factors on the basis ofthe researches that have already been done.This paper is divided into six chapters: Chapter1, Introduction, to introduce theresearch background, content, research methods and research framework. Chapter2,Literature review, identifying research ideas. Chapter3, Theoretical analysis of theauditing market structure and incentives, affect to change the structure of the auditmarket fundamentals and theoretical analysis, the theoretical basis for the empiricalresearch. Chapter4, The analysis for our audit market structure changes course, usingthe audit market data, carried out a detailed analysis of the course of our audit market structure changes, the research found that the audit market structure had become fullycompetitive type, atom type to low concentration oligopolies the market structure,decentralized market structure is gradually concentrated, but degree of concentrationis still relatively low; the local large firms gradually emerge, economic characteristicsof scale have been shown, and establish reputation mechanisms; market policybarriers gradually reduce, structural barriers gradually enhance. Chapter5, Theincentive analysis of the audit market structure changes, analysis incentives for thecourse of our audit market structure changes,from the state’s industrial policy, theexpansion of the market demand and firm internal property rights. Chapter6,Conclusions, study limitations, and recommendations. Summary the full paper, andmakes the suggestions for further optimize the structure of the audit market.The innovation of this paper lies in the following two aspects:(1) the currentliterature is to evaluate the status of the audit market structure and research, it is notfrom the vertical historical angle to research the audit market structure change, thepaper’s theoretical research perspective is unique;(2)the paper is not singly study thestructure of the audit market, but further analyzes the incentives in their changeprocess, which will has great significance for the future development of audit marketand the accounting firm.