Study On The Effect Of Limited Liability Partnership In Accounting Firms And Its Impact On Audit Quality

The accounting firms in China always adopt limited liability partnership,while the insufficiency of limited liability partnership have reduced the quality of the auditing service provided by accounting firms. All of the accounting firms involved in the 31 cases in which accounting firms or certified public accountants have been punished by China Securities Regulatory Commission(CSRC) form 2007 to 2013 adopted limited liability partnership. In order to solve the problems of the organizational form in accounting firms, and implement the requirements of the NO.56 Document issued by General Office of the State Council, the Ministry of finance, the State Administration for Industry and Commerce jointly issued the "Interim Provisions of Promoting the Large and Medium-sized Accounting Firms to Adopt Limited Liability Partnership" (Accounting[2010]No.12), and issued the implementation rules, making specific requirements for the reforms of the large and medium-sized accounting firms. Because of the government’s promoting, more and more accounting firms adopt the limited liability partnership. With reform work going smoothly, research of the reforms of accounting firms goes smoothly.In this paper, we study the listed companies of A shares which are audited by "TOP 20"accounting firms, we collect the data of corporations(with no special treated) in shanghai and shenzhen stock exchange from 2009 to 2013 to study the influence of reform to auditing quality, our work is divided into three aspects:first, we study if the reforms of accounting firms could improve the auditing quality, second, we study the influence of the way of reform(reform with merge, reform independently) on auditing quality, third,we study the influence of nature of accounting firms(TOP4 or others) on auditing quality.We use the discretionary accruals as the dependent variable to replace the audit quality, and use reforms, the way of reforms and the nature of reforming accounting firms as regressors. The empirical results show that, the reforms of accounting firms would improve the audit quality, reforms with merge happening in medium-sized accounting firms would improve the audit quality more than independent reforms in large accounting firms,and there was no significant difference between impact of reforms in BIG4 and domestic accounting firms.The main contribution of this paper lies in the study of the influence of reforms on auditing quality and the subdivision of the impact of reforms.We compare the different results of reforms in different way and the different results of reforms in BIG4 and domestic accounting firms, and provide theoretical and empirical support for reforms of accounting firms. In addition, this paper also provide some enlightening opinions and suggestions of reforms to the government supervision department,in order to help them to guide the accounting firms reform and make Chinese accounting industry more standard and perfect.