Effects Of Reform Of Accounting Firm Organization Form On Audit Quality

To promote large and medium-sized accounting firms in china adopt the special general partnership, making accounting firms being stronger, In July 2010, the ministry of finance and the state administration formulated the “the interim provisions about promoting large and medium-sized accounting firms to adopt special general partnership”(we make it simplified as “the interim provision”). “the interim provision” asked large accounting firms change their form of organization before Oct 31, 2010, at the same time, encouraging medium-sized accounting firms change their form of organization before Oct 31,2011. In comparison with general partnership, the special general partnership is one big step forward, it isolated the liability of partners to some extent, those partners who didn’t make mistakes don’t need to take the responsibility for other partners’ fault. Comparing to the form of limited liability, the special general partnership paid more attention to quality controlling and responsibility restriction, meanwhile, the limit of number of shareholder has been broken, thus it solves the problem of “double tax”, therefore, the special general partnership will be the rational choice of large and medium-sized accounting firms.In this paper, we researched the influences of this matter of changing organization form on accounting firms’ audit quality by normative research and empirical analysis. In theory, this paper described the firms’ agreement theory, firms’ organization efficiency theory and “deep pocket” theory, analyze the effects of the matter of changing organization form on accounting firms’ audit quality. In the empirical analysis, this paper choose those companies audited by ten accounting firms from 2007 to 2013 as research sample, and these accounting firms have changed their organization form. Comparing the audit quality of before and after changing, then, comparing the audit quality of those accounting firms changed their form and those didn’t change their form. Because audit quality can’t be measured directly, so we use earnings management degree and audit opinion as measures of audit quality. The result shows that accounting firms change their organization form actually could promote their audit quality, in comparison with past, the possibility of issuing nonstandard audit opinion has been increased, the earnings management degree of listed companies has been decreased significantly. Comparing to those who didn’t change their organization form, the audit quality of accounting firms changed form would be better, it’s a high possibility for these accounting firms to issue nonstandard audit opinion, and listed companies’ earnings management degree is lower.