The Empirical Research On The Impact On Audit Independence Of Firm Mandatory Rotation

Series of financial scandals which were exposed in the listed companies not only expose the fraud to public eyes, but also make the accounting linns thai provide auditing services involved in public opinion. Certified public accountants are regulators of the social and economic activities and auditors of the enterprise’s financial siatements, Recause of its independence and professionalism, It is the foundation of the public trust. As more and more audit failure events, the public take more attention to the quality of accounting information of the listed companies, they also become more strict to the audit independence of the audit firm and the credibility of the audit opinion. There are roughly two kinds of measures to improve the audit independence in the world’s counties, the one is the auditor’s regular rotation, the other is firm mandatory rotation. Predecessors’lots of studies have shown that only certified public accountants inner auditor rotation at fixed periods to the effect of improving audit independence is very limited, this question raises the thinking of the audit firm mandatory rotation. Can the firm mandatory rotation truly improve the independence of the audit? Whether the different types of audit firms make different performances to improve the audit independence after firm mandatory rotation or not? This paper divide the certified public accountants firms to three types, they respectively are the regional firms, the international "big four" firms and the domestic "big eight" firms. Our purpose is studying the effect that firm mandatory rotation act on the audit independence to give some reference to cast the firm mandatory rotation in our country.This paper selects the 3342 listed companies in Shanghai and Shenzhen two securities trading places from the year 2009 to 2012. Based on the definition of Certified Public Accountants firms types, we divide into three types of certified public accountants customer samples, respectively, there are 341 regional firms,190 the international "big four" firms and 2811 the domestic "big eight" firms, then we study The effect of mandatory rotation to improve the audit independence. First of all, we inspect firm mandatory rotation how to affect audit independence in each of these three types of certified public accountants firm’s customer samples. The conclusion is that after the firm mandatory rotation, the international "big four" and the domestic eight big firms have raised the audit independence, and the extent of the international "big four" is more obvious, however the regional firms have no obvious change to audit independence after mandatory rotation. Secondly, by joining in a regression model, we compare and analyze the different effect to improve the audit independence of the regional firms and the international "big four" firms, the territorial firms and the domestic eight firms, the international "big four" firm and the domestic eight firms after the firm mandatory rotation. The inspection conclusion is that the extent of improving the audit independence for the "big four" firm and the domestic big eight firm is significantly higher than for the regional firm after firm mandatory rotation. But they both there are no apparent differences on the influence of improving audit independence.Finally, according to the research conclusion and the present situation of firm mandatory rotation in our country, this paper comes up with some advice to heighten the audit independence of firm mandatory rotation.