A Study On The Motivation Of A-share Companies’ Interim Voluntary Auditing Based On The Signaling Hypothesis

Along with financial reporting mandatory audit, our country has been voluntary interim financial report audit. In the 1990 s, securities regulatory commission in China successively formulated the compulsory audit rules about the interim financial statements of Chinese listed companies. But at the same time, there have been some Chinese listed companies which choose to voluntary audit in our country capital market.From the special background that the listed companies in Chinese capital market voluntarily choose interim financial reporting audit, this paper researches on the voluntary audit motivations of the listed companies in China in theoretic and empirical aspect. In theoretical aspect, based on the theory of signal hypothesis, this paper analyzes the voluntary audit motivations of the A-share listed companies in China. In empirical aspect, the motivation of voluntary interim audit motivations is proven from the interim results signal transfer, newly issued securities signal transfer, bank credit signal transfer and equity incentive signal transfer.In this paper, the empirical results show that the audit demand signal hypothesis is verified by the listed companies’ voluntary audit motivations and the purpose of the voluntarily auditing motivation about the listed companies is to send signals to the external stakeholders. First, of the Chinese listed companies, the earning quality is normally low because of earnings management and the reliability of interim reporting is worse than the annual reporting. Also, the better the performance is, the more suspicion of the earnings management is. Therefore, the listed companies who report higher performance will transmit more reliable financial signals to the outside investors and the listed company has a stronger incentive to carry out voluntary audit. Second, though CSRC(China Securities Regulatory Commission) no longer requests the newly issued securities companies in the second half of the year to have mandatory audit, but the listed companies offer the reliable signals about its own financial report to the CSRC, in order to successfully apply to the new securities refinancing qualifications and they also will be more motivated to have voluntary audit. Third, to make external investors that equity incentives can reduce the agency conflicts and improve governance, the companies also need a reliable external supervision mechanism to make them believe equity incentive system play a role in corporate governance and reduce the risk of information, so the companies which have equity incentive motivation will be more likely to be voluntarily audited in order to deliver good news to investors. Finally, according to the empirical conclusions, the dissertation puts forward the corresponding measures from the view of the listed company itself, investors and the CSRC.