The Office’s Independence、Industry Specialization And Accounting Information Conservatism

Since the disclosure of the accounting scandal of Arthur Andersen and its two customers, that is, Enron Corporation and WorldCom, which triggered a worldwide significant confidence crisis in the audit industry, all countries have implemented many laws and regulations to curb audit service to ensure our auditing market to develop in a sound way. For example, USA enacted the Sarbanes Oxley act in 2003 and China issued the Auditing Standards of China for the first time in 2006. However, no lesson was drawn from the experience. And the following audit failure cases, such as Guangdong Kelon Electrical forging profits in 2006 and Yunnan Greenland Biological Technology Co., LTD. committing financial fraud in 2010, brought out serious consequences.This article, based on the frequent occurrence of audit failure cases and the harm of low quality audit, deliberates over how to handle audit risk properly so as to improve audit quality. Boosting the information conservatism of the customers is one of the most effective methods to handle audit risks. And the two key factors affecting audit quality are accounting firm’s independence and its industry specialization. Conservatism, as one of the eight information’s characteristics explicitly stipulated in our national accounting standard, on the one hand, is open to influences by external audit governance mechanism, and on the other hand, is one of the most important measures for auditors to handle audit risks better. This article attempts to figure out whether audit firms’independence and industry specialization can affect the conservatism of customers’information, and if yes, how it happens.In the beginning of this article, a literature review is made about conservatism, independence and industry specialization in terms of measuring method, affection factors and economic consequence; then based on the related fundamental theories like corporate governance theory, proxy agent theory, audit governance theory, audit risk theory, the relationship between independence, industry specialization and accounting information conservatism is analyzed, and two hypotheses are proposed: After defining the measuring standards of the primary factors, devising a multiple regression model for verifying the hypotheses, and collecting required data, this article verified the hypotheses using the methods such as descriptive statistic analysis, relativity analysis, multiple regression analysis, and etc., and reached the following conclusion:the information of the listed companies in our country is generally robust; accounting firms with higher independence is more able to promote its’ customers’ accounting information conservatism; accounting firms with industry specialization is more able to render the positive correlation between independence and consequence.Finally, in view of the inadequacies and limitations in its research process, this article provided some research suggestions about independence, industry specialization and accounting information conservatism as well as a prospect of possible fields for future study.