A Research On Penalties For The Violations Of Listed Companies Affecting CPA’s Behavior

With the development of socialist reform and the gradual maturity of socialist market economy, there has been a sustainable and rapid growth in domestic listed companies. However, as the evolution of public companies of capitalist market economy, there were a large amount of illegal activities during the development of those public companies. Hence, the majority of investor became pessimistic. Meanwhile, the healthy and orderly construction of a socialist harmonious society was also seriously hindered. Therefore, the government and other regulators in violation of the listed companies get more and more attention of people. These penalties will cause a series of capital market response, including investors raise vigilance, listed companies strengthen management and CPA selects the behavior and so on. Public companies involving illegal activities are listed and tracked by some supervision organizations, such as the China Securities Regulatory Commission (CSRC), Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE), after to be penalized by those organizations above. Additionally, the probability of re-offending punishments is relatively high. As a result, Certified Public Accountants (CPAs) who provide those public companies with audit services undertake relatively high audit risk. Moreover, owing to relating to the reputation of CPAs and even criminal penalties, the risk factor must be considered carefully when CPAs offer audit services to their clients. Simultaneously, it is expected that this research may improve CPA’s power to dominate audit pricing and audit opinion in the stock market. What’s more, the current domestic research on the violation cost of public companies rarely involves the audit cost. This thesis studies the behavior choices of CPAs who provide audit services to those penalized public companies. It is hoped that this research can attract supervision departments to pay attention to the punishments for violations. Then, the investigation of supervision departments will be promoted and the public companies involving illegal activities will be punished severely. At the same time, it is also expected that this study might draw the attention of domestic listed companies concerning with the audit cost of illegal activities. It can assist public companies to decrease violations and participate in market competition fairly. And as a consequence, the healthy and orderly development of nation economy will be boosted.This thesis is divided into five chapters. The first chapter is the introduction. Firstly, the background and significance of this research are introduced. And then there are summary and comments of the domestic and foreign literatures. Finally, the research ideas, methodologies, innovations and shortages are illustrated respectively. The definition and basic theories are depicted during the chapter two. Basic theories including meanings and performance of the violations of public companies, the significances and types of CPA’s behavior and punishments for violations of public companies affecting CPA’s behavior are presented respectively. Chapter three relates to the analysis of the current situation and mechanism. The illegal activities of domestic public companies and penalties for violations of public companies affecting CPA’s behavior are mechanism analyzed. The fourth chapter is the part of empirical research. At first, the public companies which were penalized by CSRC, SSE and SZSE from2008to2012are studied. After that, some empirical research models are designed, and the research models are empirically tested as the data is substituted into via some data analysis software. The correlations between the violations of public companies and CPA’s behavior are discussed via combining descriptive statistics with linear regression method. At last, it is concluded that whether the CPA’s audit pricing and the types of audit opinion are influenced by the punishment announcement from Chinese supervision organizations or not. In chapter five, the conclusion, countermeasures and future research prospected are stated. First of all, the results of empirical research are elaborated. Furthermore, suggestion about restraining the illegal activities of public companies is introduced and the prospect of future research is illustrated.The innovation and characteristic of this article is that penalties for the violations of public companies affecting CPA’s behavior are analyzed by comprehensively utilizing the audit risk theory, the signaling theory and the rational choice theory in normal study section. The innovation of this thesis above can help to broaden the range of research about the aftermath of penalized public companies. Meanwhile, the penalty type for the illegal activities of public companies is redesigned concerning with the quantification of variables.In addition, the previous five punishment types are reclassified into new three types. This innovation more exactly presents that different punishing types have diverse impacts on CPA’s behavior.