Study On The Impact Of Earnings Management To Audit Opinion

The phenomenon of earnings management of listed companies was common inour capital market. In2006, China Auditing Standards and risk-based audit modeapplied, CPA increased awareness of risk prevention, and thus earnings managementof listed companies was more sensitive. Once the company’s earnings managementexceeded the level of importance of audit, the CPA will issue a modified auditopinions in order to reduce audit risk and litigation risk. Otherwise, once a materialmisstatement due to earnings management caused by the regulatory authorities oridentify users of accounting information, the CPA will face severe punishment,including economic responsibility and disqualified for practice. Thus, earningsmanagement of listed companies on the CPA audit opinion issued has a certaininfluence.For the past Earnings Management and Audit Opinions study did not distinguishbetween the nature of earnings management, even some research divided the natureof earnings management (Chen Xiaolin, Lin Xin,2011), but lack theoretical supportdivision standard. Due to the different nature of earnings management is an agentunder different motivations result of the conduct, and the different nature of earningsmanagement will result in different economic consequences, its potentialmisstatement risk is also there is a big difference, so research Earnings Managementon Audit Opinion impact should be different. Researching the different nature ofearnings management will help CPA screen the different nature of managementearnings and economic consequences, and this will help CPA gain a betterunderstanding of the nature of earnings management in order to improve the theoretical level of CPA, made audit work efficiency, and indirectly improved thequality of accounting information, ultimately achieved Pareto improvement of capitalmarkets.In the first chapter, earnings management on the impact of audit opinionsliterature were collated and reviewed. On the process of reviewing the existingliteratures, we found that: the relation between Earnings Management andnon-standard audit opinions was not clear. Not further classified on earningsmanagement was the nature of this difference. In the second chapter, from the listedcompany’s management to management earnings motivation departure, the earningsmanagement is divided into: a certain threshold pressure earnings management andnon-specific threshold pressure earnings management. And we expected the differ onthe audit opinions impact. The third chapter is the research design used in this paperdiscusses the sample and data sources, variables set with the model set. The fourthchapter is the empirical results and analysis, using Jones model to measure the degreeof earnings management, using2007-2012Chinese non-financial, insurancecompanies unbalanced panel data empirical test. Eventually come to the followingconclusions: the higher the degree of earnings management of listed companies,CPAs non-standard audit opinions published the higher the probability; differentnature of Earnings Management on Audit Opinions significant differences, CPA listedcompany earnings certain threshold pressure management of non-standard auditopinions published a higher probability.