Optimization And Perfection Of The Independent Auditing Reputation Mechanism

As the audit failure case and financial fraud case emerge one after another in the capitalmarkets at home and abroad, certified public accountants industry faces a serious credibilitycrisis. But due to the marketability degree of our country is not high, the economic value ofreputation and the incentive and constraint of reputation mechanism is not effective, thevirtuous cycle of independent auditing reputation mechanism in our country has not yetformed. Aimed at the actual situation of our country, this paper analyzes the present situationof the independent auditing reputation mechanism in detail comprehensively andsystematically. Different from law mechanism’s mandatory, reputation mechanism is a kind ofinformal and optional system. Independent auditing reputation mechanism is a dynamicoperation system focus on the independent auditing reputation, involving all aspects of theaudit industry, it can transfer market information effectively, provide the quality guarantee,save transaction costs and regulate the capital market.Independent auditing reputation mechanism is mainly composed of market demandmechanism, management mechanism, punishment mechanism and information transmissionmechanism. The bad auditing environment in our country lead to poor reputation auditrequirements, audit client’s choice result in adverse selection of audit reputation, it doesn’tform spontaneous demand of independent auditing reputation in the market; Because ofindependent audit external supervision system’s chaos, supervision system’s imperfect and thelack of public accounting firms internal management, we can know that independent auditingreputation management system is imperfect; At present, the punishment of China’ssupervision department is too light, the civil compensation system is lacking, the reaction inthe stock market of audit clients is not obvious after a bad reputation, the number of auditclients is abnormally increasing instead of reducing, these are the failure performance ofpunishment mechanism; The lack of audit reputation rating system and the blockedtransmission of reputation information, information transmission mechanism is not smooth. Ingeneral, we can draw a conclusion that the independent auditing reputation mechanism in ourcountry is not fully effective, there are also many problems. It is suggested that effectivemeasures should be taken to solve these problems mentioned above in the actual situation ofour country. We can from an good audit market environment and optimize the governancestructure of listed companies to improve market internal demand for independent audit reputation; we can strengthen the external regulation of certified public accountants industryand the internal management of audit firm to perfect management mechanism; we canincrease the degree of punishment penalties and perfect civil compensation system to improvethe failure status quo of punishment mechanism; we can improve the auditing industryreputation evaluation mechanism and information transmission mechanism to provide thetransparency of reputation information. These measures can help to form a good circulation ofindependent auditing reputation mechanism, it finally promote the effective operation of theaudit market.