Research On The Cause And Consequence Of Audit Clients Follow CPA’s Job-hopping Of Accounting Firm Changes

Under the Chinese traditional culture background of the strong interpersonalrelationship, people prefer to transact with their acquaintances with they already havesome sort of connection. There is no exception in the audit business. In the bilateralrelationship, this is reflected in the relation of audit clientsmanagement and the CPA. Inthe audit practice, it’s a common phenomenon that when the CPA moves to anotheraccounting firm, audit clientschoose to “follow” CPAsto the “newowner”together.Consequently, the “audit clientsfollow CPA’s Job-hopping”of accounting firm changeswill come into being. The interpersonal relationship between the audit clients andCPAremains the same in spite of the firms change.These years, the frequency of auditor changes is high all the time. This issue hasaroused great attention in the academic circles, supervision departments and amonginvestors. Included in auditor changes is a special phenomenon. The audit clients mayfollow the auditors when they hop to another auditing firm. Firstly, previous academicresearches view firms and auditors as a whole. There is no strict distinction between theaccounting firm changes and auditor changes. Andup till now, there are rare researchesthat focus on the loss of audit clients caused by job-hopping of individual auditors;Secondly, most investors failed to give enough attention to the information conveyed bythe phenomenon discussed above; Thirdly, the regulatory departments haven’timplement effective policies to deal with the frequent job-hopping of auditors. However,compared with other forms of accounting firm changes,“audit clientsfollow CPA’sJob-hopping”changes imply more causes and consequences.Therefore, furtherresearches on these problems are of greater academic value and practical significancefor the academic, public and the regulators.First of all, this paper elaborates on the concepts of auditor changes, accountingfirm changes and “audit clientsfollow CPA’s Job-hopping”changes; secondly, thetheoretical basis of this paper is explained through referring to the resource controltheory and interpersonal relation theory; then, the paper chooses the year of2011-2013554firmschange from the Shanghai and Shenzhen A shares of listing Corporation as theresearch sample, in which the “audit clientsfollow CPA’s Job-hopping”changessample153, sample401other accounting firm changes. By comparing the other accountingfirm changes, for the motivation andconsequences of “audit clientsfollow CPA’sJob-hopping”changescarries theoretical analysis, and put forward relevant hypotheses, and using descriptive statistics, correlation analysis and multiple regression analysis totest the relationship betweenaudit clients and the CPA,demand of audit opinions for theinfluence of“audit clientsfollow CPA’s Job-hopping”behavior, and when this behavioroccurs, the impact on theaudit opinion, audit fees.The results are as follows:(1) When aCPA changes his job before he establishes aclose relationship with his audit client,the clientsfollowhimmay be chiefly motivated byhis need of standard audit advice. In other words, when the auditor offers hisclientsstandard audit advice,there will be a great possibility that his clients may followhim to choose another accounting firm after he changes his job.(2)When there is a closeinterpersonal relationshipbetweenCPA and audit clientsand their assets are tightly boundtogether,the client’s need for standard audit advice may be reduced to the secondarymotivation for followingthe CPA after he changes his job.(3) After the audit clientsfollow the CPA and choose another accounting firm, compared with otheraccountingfirm changes, the “followed”CPA may offer his clients the satisfying audit advicewithout breaking the business bottom line for the sake of mutual interests or simply as areturn for the client.(4) In terms of audit fees, the CPA may offer theold auditclients“preferential treatment”,which may not be possible in other cases, for reciprocalinterests or to repay the client for their business connection or in other words, an auditfee discountto a certain extent.Finally, the thesis points out the limitation of the present research and the directionin which this research can be furthered. With a view to the current situation, severalproposals are put forward for regulatory departments, such as perfecting the informationdisclosure systemof “audit clientsfollow CPA’s Job-hopping”, making clear theprecautions and what reports should be presented before and after a CPA quits his joband strengthening the successor firm’ssupervision on the phenomenon of “auditclientsfollow CPA’s Job-hopping”.