Research On Firms Transformation Effects On Audit Quality

The relationship between form and the audit quality of accounting firms has been a topic of concern of scholars, the conclusions are not the same. China began to promote CPA firms from the limited to the special general partnership since 2010 (LLP) transformation, providing more opportunities for the study of the relationship between the form and the audit quality of accounting firms. In 2010 the Ministry of Finance issued the "Interim Provisions" on the promotion of large and medium-sized firms adopt special general partnership, some domestic large firms and international big four accounting firms in 2011 and in 2012 completed the business transformation to the special general partnership by the limited liability company, which not only marked the beginning of the organization form of accounting firm reform in China, also represents the strengthening government regulation on CPA industry and policy support.This article from the accounting firm reform background, research whether the organization form of accounting firm changes will affect audit quality. From 2008 to 2012, major events related with firm transformation has three, respectively, in 2010 is the "Interim Provisions" issued in 2011,9 non big four transformation in 2012 and the big four accounting firms collective transformation. In the inspection firms to transform effect on audit quality, different from traditional research methods only focus on specific firm changes in the annual audit quality before and after the transformation, the paper examines the impact of the accounting firm to audit the quality system from two levels of transformation policies and accounting firm practical transformation. In this paper, with positive earnings management amplitude (positive discretionary accruals) as a substitute variable of audit quality, will be China’s 2008-2012 A shares of listing Corporation data were divided into three groups, the four group (conversion in 2012), non big four transformation groups (conversion in 2011) and non big four not change these three groups of sub in the sample, with the sample period every two consecutive years of data multi censored regression (Truncated Regression) analysis, to study the effect of various events for each sample group of audit quality.Study found that, in the system policy issued in 2010, various types of Certified Public Accountants (including four big and non big four audit clients) positive earnings management amplitude are systematic decreased significantly, which means "a 2010 promulgated to promote large and medium-sized firms adopt Interim Provisions" special general partnership organization form of the accounting firms audit quality at the policy level have a systematic increase; and in the domestic part of the four major international accounting firms and the actual transfer after two years, the magnitude of earnings management is the customer does not exist significant differences, audit quality did not significantly improve. That certified public accountants face legal risk in the system policy layer made respond in advance, namely the expected changes in legal risk accounting firms have the restructuring policy brings in advance to make preventive reaction, that improve the quality of auditing firms to transform to will be achieved before the actual transformation, thus weakening the researchers observed possibility to further improve the quality of audit in the firms to transform near.