A Study On The Correlation Between Mandatory Auditor Rotation And Audit Quality

Since the second half of 2001,a series of financial Corporation fraud cases happen at home and abroad,which make the CPA industry reputation suffered an unprecedented impact.People began to analyze and discuss why the CPA can not detect and report the fraudulent financial reports of the Listed Companies and the reasons of audit failure,a problem often mentioned is the relationship between audit tenure and audit quality,the problem of mandatory rotation attracted the attention of the parties.the paper is based on the system background "the rules about the signed certified public accountants regular rotation of the securities and futures audit service " which enacted by CSRC on October 8,in 2003, combines the existing results and the actual situation of China,uses the ways of normative research and empirical analysis, acts our country’s signed CPA mandatory rotation as the breakthrough point, has systematically analyzed the relationship between China’s auditor mandatory rotation and audit quality through through two major parts of the theoretical and empirical.The theory part has trawled through the basic theory of audit quality and mandatory rotation in detail,resolved the reason and effect of auditor mandatory rotation, demonstrated the influence mechanism of auditor mandatory rotation on audit quality.The empirical part choose A shares public corporation from 2011 to 2013 in Shanghai and Shenzhen as research sample, the company’s earnings quality before and after signed CPA mandatory rotation are comparatively analyzed,the different ways and signed CPA mandatory rotation of are compared, so that the difference of influence on the audit quality between them can be got.According these,to whether and what the extent the mandatory rotation of auditors improves the audit quality can be demonstrated, also which way of rotation can more effectively improve the quality of audit. The results show that, after controlling the influence of other variables of audit quality, the signed CPA mandatory rotation has been improved the audit quality to a certain extent, but the effect is not significant, while the auditor changes does not belong to the category of mandatory rotation in China, the empirical research shows that it can improve the audit quality more, therefore, the author suggests our country should carry out the mandatory audit firm rotation not just the mandatory rotation of signed CPA.