Research On Economic Consequences Of Administrative Punishment Of CPA Firms

With the development of the capital market,the ownership and management rights begin to separate gradually in enterprise,the enterprise owners grant the management and operation rights managers,the managers assume responsibility for the owners.In the separation of the two rights era,the contradictions of information asymmetry are more and more prominent between the owners and managers.Some financial frauds,such as "Yinguangxia","Green earth" and "Edmond branch" ring the alarm to China's securities market.As the accounting firm to provide audit services,should bear what responsibility,accept what kind of punishment,and the punishment will produce what kind of the economic consequences of firms has become a hot topic after the audit failure.This paper based on the case study of Reanda CPA firm,combined six administrative punishment by the Commission with Reanda,accounting firms in the number of customers,audit fees,audit business income and audit quality as the indicators to examine the economic consequences of the firm administrative punishments by the Commission,and on this basis,from the angle of the accounting firms,puts forward some countermeasures and suggestions the corresponding.This paper takes sample of listed companies audited by Reanda from2008~2016 years,distinguish the first time and again administrative punishment,according to the point of the administrative punishment,the punishments are divided into three stages,and select control groups,analyses the influence effect on firm by the first administrative punishment and several administrative punishments comprehensively.Through the analysis of the change in the number of customers audit fees,audit income and audit quality of Reanda from 2008 to 2016,we find that the number of customers,audit fees and audit income are not drop because of the punishment,instead,it will follow the general trend of the market to maintain the upward trend,the audit quality was not significantly improved,while continue to deteriorate,this shows that there have no effect on CPA firm for the first punishment.But after the second punishments,the number of customers,audit fees and audit business income will rapidly decline,and maintain a low level for a long time,the audit quality will be improved,the repeated punishment will lead to negative effect significantly on firms,they will also take some measures to improve audit quality.From the regulatory point of view,the industry regulation is lagging behind,administrative penalties have not achieved immediate results,therefore,we should improve the efficiency of supervision and strengthen supervision.For accounting firms,punished by the the Commission means that the audit quality is low,and will inevitably lead to the destruction of the audit reputation.After being punished for the first time,the firm should not be given a favorable attitude because it has not been adversely affected.Once the audit quality was kept low,the administrative punishment would follow.Therefore,the accounting firm should be careful with audit clients,reduce audit risk;improve the quality control system and improve the quality of audit;pay attention to occupation morality,prevent the violations;pay attention to brand reputation,in order to avoid subject to administrative penalties again.