The Empirical Study Of The Influence Of Administrative Penalty On Audit Quality

CPA audit plays a more and more important role in improving the quality of information in capital markets, but the characteristics of the CPA profession have may led to the possibility of audit failure. The frequent occurrence of accountant cheats and audit failure associated have disrupted the order of the capital market and caused huge loss to investors. Countries have taken measures to improve audit quality by strengthening supervision. The regulation in China has gone through four stages, and now the government is playing the most important role and the self-regulation is playing a strictly subsidiary role. The government tries to improve legal risk to improve audit quality and bases on administrative punishment mainly. Theoretically, administrative punishment can improve audit quality by the mechanism of reputation, the mechanism of deterrence and education and the mechanism of supervisory. But in our country, administrative punishment can’t bring a huge loss, and whether administrative punishment can improve audit quality has become the concerned topic of investors and stakeholders. This paper will choose discretionary accruals to measure audit quality and compare the audit qualities before and after administrative punishment. Then we draw a conclusion that administrative punishment can improve audit quality. The main innovation is that this paper compared the factors which may affect the result, including the form of administrative punishment, the harshness of administrative punishment and the organizational form of the accounting firms, and hopes to give advices to CSRC.