The Effcct Of Audit Firm Size On Audit Quality

The relationship between audit firm size and audit quality has been received extensiveattention of scholars and regulators. Many foreign studies have shown that the effect of firmsize on audit quality is positive; but in our country, the effects of firm size on audit quality arestill controversy. With the gradual development of the audit market, the relevant governmentdepartments also continue to strengthen the firm’s regulatory and legal punishment to ensure asound legal environment. Based on our audit industry’s competitive environment, governmentissued documents, which hope accounting firms can do “bigger and stronger” and improvecompetitiveness. In our government “bigger and stronger” background, how accounting firmsize affects audit quality? Whether the impact of firm size on the different types of alternativeindicators of audit quality is consistent or not? These questions need to be furtherinvestigated.This paper uses a combination of normative and empirical method to research. Firstly,based on the review of the literature about audit quality, the alternative indicators of auditquality are divided into the actual audit quality and perceived audit quality. Combined withdomestic researches， this paper identifies the questions to study. Secondly, combined witheconomies of scale theory, signaling theory, reputation theory,“deep pocket”, theory, productdifferentiation theory, the paper analysis the impact of firms size on actual audit quality,corporation perception of audit quality and investor perception of audit quality, based onwhich to get our corresponding assumptions. Finally, Based on China’s securities market datafrom2010to2012, research hypothesis can be tested. This paper also make relevant policyrecommendations based on the results.Leading to higher earnings response coefficients. The innovation of this paper mainlyreflects in the three followings: First, due to the measure of audit quality are diverse, thispaper reviews the existing research at home and abroad to divide audit quality into the actualaudit quality, the perceived audit quality, and try to build a framework for audit qualitymeasured. Secondly, this paper takes date from2011to2013as the object. Considering thesingle condition classification may exist certain differences， this paper chose to use cluster analysis to divide the scale of firm. This paper studies the impact of firms size on audit qualityfrom the actual audit quality, client’s perceived audit quality, investors’ perceived audit quality,testing various forms of audit quality is consistent or not. In the background of the third waveof consolidation, the impact of firm size on audit quality can provide a foundation of thedevelopment of large-scale firms.This paper study the effects of firm size on the actual audit quality from the perspectiveof earnings management, on the client’ perceived audit quality from perspective of audit costs,and on the investor’s perceived audit quality from perspective of earnings responsecoefficients. Conclusions are:(1) Compared to the “small firms”,“large-scale firms” auditclients’ discretionary accruals are significantly lower;(2) Compared to the "small firms","large-scale firms" audit clients get more recognition, and thus can charge higher audit fees;(3) Compared to the "small firms, large-scale firms’ investors should be able to get morerecognition.