Study On The Listed Company’s Auditor Selection Based On The Perspective Of The Internal Control Quality

Through continuous game between the both sides of supply and demand in audit market, a direct manifestation of the audit demand derived,that is auditor selection.Suppose the audit market is a benign and with spontaneous demand market,than the demand party always pursue the high quality audit services,that is to say,audit market should be such a situation:Large-scale and high quality accounting firms occupy more than eighty percent of the audit business.However,existing research has shown that demand for high quality audit service was relatively lack in China’s audit market,audit market appeared an extremely dispersed state.So the basic idea of our research on auditor choice is that analysis market factors and institutional background of the lacking for high quality audit demand in China. To guide the audit market for the demand of high quality audit, so as to enable auditing plays its external governance effect better.Modern audit depends on internal control,to study the internal control theory is the focus of auditors,and auditors become the initiator,promoter of theoretical study,and also is the most important users for this theory.With the gradual development of market economy,capital market demands for the quality of financial information are much higher,making the autiors asing economic police pay more attention to the establishment and implementation of enterprise internal control system.The development of internal control theory and practice and auditing theory and practice are accompanied,so like internal control,like audit mode.Auditors will usually study the implementation of the internal control systemt in the choice of its customers,in order to decide whether to accept the examination and how to exam.That is to say,in audit market,and in the two-way choice of audit object and subject,internal control circumstances will be an important factor affecting the result of choice,different enterprise will choose different auditor because of its own internal control condition,while the auditor, itself will decide whether to accept the audit business.in light of the differences in the client’s internal control status and the level of auditing risk.Some scholars in China also try to research the preference to firm from the company’s internal control angle,although these studies from different angles to measure the quality of the internal control of the company,associat the internal control with auditor choice.This article is based on this background and try to study the effect of Corporation internal controlquality on Auditor Selection,in order to better understanding the whole situation of internal control of China’s listed company,and try to analysis the possible reason of the preference behavior.Based on the above analysis, in order to analysis the Relationship between the quality of and auditor choice,this paper do the following specific things:The first part is the exordium, mainly states the research background and significance, the research mentality and the research content and research methods and research framework,to Pave the way for the theoretical analysis and empirical test of the following.The second part is the literature review,it is the basic part of the paper.As a combination of the theme,this part first discusses the standards research on internal control quality,and then reviews the relevant research on auditor selection and audit opinion purchase.Finally,back to the topic,this paper analysis the research on internal control quality and auditor choice systematicly.After reviewing the domestic and foreign literature,this article evaluates the existing literature,and find the defects and deficiencies as the basis for further research..The third is the theoretical analysis and researchhypothesis.According to the analysis of the theory of internal control and audit,the paper proposes three hypotheses:Firstly,in other conditions remain unchanged,the lower the internal control quality of listing Corporation is,the more inclined to choose small accouting firms.Secondly,in other conditions remain unchanged,and in the same quality of internal control, the probability of receiving clean audit opinion is greater when choosing small accounting firm.Finally,in other conditions remain unchanged,to the companies with changed auditors,the relatiom between the demand to large-scale auditing firms and the internal control quality are expressed as an inverted U relationship.The fourth part is the design of empirical research,including the variable design and model design.This paper will give an empirical analysis of the relationship between the quality of internal control and accounting firms choosing and audit opinion, as well as the impact of internal control quality on auditor change direction.This paper will make the degree of internal control target to measure the internal control quality of listing Corporation,and analysis the relationship between the quality of internal control and auditor selection. Why it will produce this preference? So this paper analyzes the motivation of this preference, whether to choose the small size firms for a clean audit opinion because of its low internal control quality.But what is on earth the relationship between the quality of internal control and the change of auditor choice direction? So this paper analyses this relationship to find out the effect of changes in internal control quality on the change of the auditor selection direction.The fifth part is the empirical analysis, this part give the variable to descriptive analysis, correlation analysis, regression analysis and stability test, three hypotheses are verified from different aspects.Through this research verifies the above hypothesis,that is,in other conditions remain unchanged, the lower the internal control quality of listing Corporation is,the more inclined to choose small accouting firms,and in the same quality of internal control, the probability of receiving clean audit opinion is greater when choosing small accounting firm,and to the companies with changed auditors,the relatiom between the demand to large-scale auditing firms and the internal control quality are expressed as an inverted U relationship.Through theoretical analysis and empirical test,the hypothesis this paper put forward has been effectively support.According to the result of the article,this paper gives the corresponding recommendations.Finally,in the last part,the article discusses the contribution and the deficiency of the thesis.The contribution of the paper lies in:(1)To use a new measure standard to show the quality of internal control, refering to the research from Debo and China listing Corporation internal control research group,this paper use the degree of the internal control goal to evaluate the quality of enterprise internal control,so can carried on the quantification to the internal control index, and the feasibility of this method was verified in practice.(2)This paper analyzes the possible reason of this choice preference,through this study,the research perspective of listing company’s auditor selection will be extended.further analyze the factors of auditor choice, to help and guide the supervision institutions to dedicate to the construction of China’s demand for high quality audit market, to promote regulatory authorities stepped up the pace and improve relevant laws and regulations of the internal control.(3)Combing the logic relationship between the quality of internal control and auditor change direction,thus validated that only when the company internal control is effective enough, the external audit and internal control will appear a certain substitution effect,to further enrich the firm change literature.Of course,due to the limitation of my level,this study also have many shortcomings:(1)Due to the large amount of manual data collection,there are errors and certain subjectivity,The reliability of Internal control index designed has some problems.(2)Because of fewer samples in this paper,to some extent,the reliability and validity will affect the conclusion of this paper.And non-listed company may not apply to the conclusion.(3)Only replace the explained variable when doing the robust tests,also can use other methods to measure the quality of internal control,this is also the direction of future research.