Limited Liablilty Partnerships Influence On Audit Quality And Audit Fees

CPA is known as "economic police", and the CPA system has provided a good protection for China’s capital market. However, the audit quality of CPA is not high enough. What’s worse, the CPA system still has many disadvantages. How to improve the audit quality of CPA has been a difficult problem for the audit field. In order to solve this problem, the China’s Ministry of Finance issued the provisional rule about promoting the large and medium-sized accounting firms to adopt the special ordinary partnership. LLP will face higher legal risk, and take more legal responsibility. In this case, will the accounting firm improve its audit methods, and improve audit quality? Will the accounting firm charge higher audit fees in order to deal with the possible litigation? The changing of the accounting firms’organization form, whether it can achieve the target, and promote the accounting firm become bigger and stronger?In order to answer these questions, this article studied by the listed companies data in Shanghai and Shenzhen Markets in China. Based on the Reputation theory、fraud triangle theory、contract theory、risk reward theory, combining normative research and empirical research on influence of the change of organizational form of the firm on audit quality and audit pricing. The conversion process is divided into "approval transformation stage" and "substantial transformation stage", and from two stages to study the LLP influence on audit quality and audit pricing.The results show below. (1) In "approval transformation stage", to approval by the department of finance as the time of the conversion of the time, the improvement of audit quality is not significant; In "substantial transformation stage", a special ordinary partnership issue the audit report of the year as of the time, and the audit quality is improved significantly. The improvement of audit quality has time delay, and improving the quality of audit work need to accumulate over a long period. (2) The audit fee has been improved after the accounting firm has been transformed into a special general partnership system. This phenomenon is reflected in "approval transformation stage" and "substantial transformation stage". In financial department approval for the conversion of special ordinary partnership of ascension as soon as the audit fee. The improvement of audit fee does not need a complicated process. (3) In this paper, empirical results found that, accounting firms into LLP will improve audit quality and audit fee. This paper found that the anticipated target of the policy is reached, and it conducive to development of audit market in China.