The Study On The Relationship Between Listing Corporations’ Audit Rotation Mode And Audit Quality

At the beginning of twenty-first Century, as Enron, World Com and other world famous multinational enterprise financial fraud scandals have been exposed, the public pay increasing attention to the question that whether the audit can play its due role. And then the theory and practice circles of auditing quickly pushed for a large amount of institutions in order to improve the quality of audit, in which audit mandatory rotation system is an important part. Since the early twentieth Century, The concept of audit rotation has continued to cause the academic debate, and the impact of audit rotation on audit quality remains controversial.This paper takes the influence of audit rotation on audit quality as the research subject and discretionary accruals and audit opinions type as the explained variables, rely on large sample data and the introduction of earnings management model, and intends to make an empirical research on the influence of different ways of audit, voluntary or mandatory signing auditor or audit rotation on audit quality, which based on reading and summarizing the achievements of audit quality and audit rotation’s concept, development, classification and relationship on the existing research achievements. The main conclusions are as follows:1. Through the descriptive analysis and regression analysis of the sample statistics, research draws that in current our country’s audit services, certified public accountants’ voluntary rotation phenomenon is relatively common, and its influence on substantive audit quality is not significant.2. Through the regression analysis, research finds that certified public accountants’ mandatory rotation can reduce the possibility of enterprise financial fraud to some extent, but is unhelpful to improve the ability of audits to found the financial fraud. So the mandatory rotation has a certain role on the improvement of audit quality and the reduction of financial fraud.3. Through the regression analysis, especially which use the type of audit opinion as the explained variable regression, it is found that audition firm rotation has no effect on earnings management behavior, but has a significant role in the improvement of the finding and reporting of financial fraud to auditors. So it is proposed that the relevant departments and audit industry self-discipline organization shall investigate and issue mandatory rotation system as soon as possible to promote the improvement of China’s audit quality.