The Effect Of Accounting Firm Mergers On Audit Qualiy

In2006, the Chinese Institute of Certified Public Accountants proposed a "bigger and stronger" strategy for accounting firms. Then in May2007they issued the 《The Suggestion of promoting of the bigger and stronger accounting firms》.In response to the above politic documents survival and development of the file and its domestic leading firms, quickly set off a new round of merger climax. Guided by the above politic documents, and the survival and development of the firms themself, domestic quickly presented a new round of accounting firm mergers.Meanwhile, as one kind of service, the audit quality is the guarantee factors to the fundamental and steady development of accounting firms. If they can’t guarantee the reliability of audited financial statements, auditing will lose the meaning of their existence. So, promotion of the audit quality is a urgent problem facing every firm. The accounting firms are trying to expand scales, reduce costs by means of merger to improve the quality of auditing services.Presently, it has been seven years since the association put forward the "bigger and stronger" strategy. The integration period of the public accounting firms should also be in the past. It is the best time to further study the economic effect of accounting firm mergers. What is the effect of the mergers exactly? Is "bigger" and "stronger" related to each other? Whether the mergers will bring the improvement of audit quality or not? Has the mergers achieved their primary intentions? All these problems need us to be verified.This article mainly attempts to explore the connection between the accounting firm mergers and audit quality through the methods of empirical and normative study. First of all, based on the knowledge of literatures domestic and overseas and the related theories, we assume that the mergers will lead to the improvement of audit quality. Then we selected eight typical mergers in2009as the research object and organize their data of124a-share listed companies. Secondly, we set up a multiple regression model, and select the Modified Jones model to calculate the discretionary accruals which we choose as the substitution variables of audit quality. The data finally proved that:The Mergers of accounting firms can improve the audit quality significantly. Finally, the article analyzed the reasons that exist in the process of mergers which may lead to the failure of the improvement of audit quality. It provides some empirical evidence of the effect of the "bigger and stronger" strategy for related departments. In the end, this paper put forward some optimizing measures to help to improve the audit quality from two aspects:country policies and accounting firms. It provides some reference for the transformation and large-scale development for our country’s audit market in the future. In order to make the research more rigorous, and the conclusion more persuasive, the innovation point of this article is that:On one hand, I choose a longer observation period—3years before and after the merger, to reduce the negative effects caused by the integration; On the other hand, this paper also control an important factor—the auditing opinions, and just choose the companies issued with the standard auditing opinions.