Research On The Relationship Between Corporate Governance Characteristics And The Risk Of Material Misstatement

In early 21 st century, corporate governance research is growing rapidly as a result of the occurrence of financial fraud at home and abroad. In addition, the auditing theory field and auditing practice field are also beginning to study, improve and apply the new audit model: the modern risk-oriented audit model. It’s first audit procedures are identification and evaluation of material misstatement risk. Based on the starting point of corporate governance and the status of corporate governance in China, this paper will carry out theoretical analysis and empirical research about corporate governance characteristics of our country and the correlation of material misstatement risk.The theory analysis part: first of all, this paper restates the concept of corporate governance on the basis of literature review of the related researches, and introduces the corporate governance of our country; Secondly, related theories about the meaning,classification and causes of the material misstatement risk are analyzed; Finally, the relationship between corporate governance and the risk of material misstatement are analysized, especially the relationship between the ownership structure, board characteristics, characteristics of the board of supervisors and the material misstatement risk, such as the size of the board of directors, the proportion of independent directors.Empirical research part: the study is carried out by using the combination of empirical and normative research method. First of all, this paper puts forward correlation assumption between seven characteristics of corporate governance index and material misstatement risk on the basis of theoretical analysis; Then, this paper selects 61 public companies which were punished by stock exchange or securities regulatory commission since 2010 and 61 companies which were not punished and have the same industry and ownership with the published companies as research samples. Besides, this paper builds the Logistic regression model for empirical analysis. In this model, the substitution variables of dependent variable(material misstatement risk) is whether the companies were punished by a stock exchange or securities regulatory commission because of violation, and the independent variables are ownership structure, board characteristics, characteristics of the board of supervisors governance characteristics, including equity circulation ratio, equity concentration, board size, board independence, chairman and general manager have two part-time, size of the board of supervisors, etc.; With the company size, profitability as control variables. Empirical study found that there is significantly negative correlation between the shares of public companies and the risk of material misstatement; there is a significantly positive correlation between equity concentration, chairman of the board concurrently general manager and the risk of material misstatement; The independent directors proportion is negatively related to the material misstatement risk, weakly; The setting of audit committee and material misstatement risk are unrelated at 5% significant level; The board size and the size of the board of supervisors is negatively related to the material misstatement risk, weakly.Finally, based on the empirical results, this paper analyzes the cause of all sorts of results, and hopes that it will have some reference to certified public accountants when identify and evaluate material misstatement risk. In the process of research, based on corporate governance issues, this paper puts forward suggestions that the optimizing equity structure, giving consideration to both the efficiency of the board of directors and independence, improving of effectiveness of board of supervisors and the system of the audit committee, in order to improve corporate governance in our country.