The Research On Audit Quality Of Chinese Accounting Firms' Branch Offices

During the developing process of Chinese accounting firms, they become bigger and more stronger by not only improving comprehensive strength through merging rivals but also setting up new branches in other cities according to strategies,which are also two means that lead to the forming of accounting firms' branch offices. After three times' accounting firm merging climax and the pushing of related policies and regulations, the accounting firms' branch offices developed rapidly in China, they have played an more and more important role in the audit market since their large quantity and large percent of market share. Accounting firm is the organization that independently plays the role of economic supervision in the capital market; therefore, its quality has always been attracting attentions from the stakeholders. Acting as the practice office of an accounting firm and directly undertaking the audit work, the branch office's quality is also the great concerning for stakeholders with no exception. However, in previous study on audit quality, scholars have always treated accounting firm as a whole without distinguishing them at office-level and national-level, which implies that every branch of a certain accounting firm is the same with their audit quality, denying the fact that accounting firms at different levels are not one since branch office are set up on different purposes and differs each other in the degree of control from headquarters of the accounting firms. Therefore, previous conclusions draw from the national-level should not be applied directly to the office-level of the accounting firms.Based on the background mentioned above, this paper studies on the accounting firms' branch offices specially and try to probe into the factors that have an effect on their audit quality. In this paper, we consider that a branch office's audit quality is determined by such five aspects: headquarters' control, branch office character, audited company character, relationship and external environment. We take listed companies audited solely by branch offices in 2013 in the China's stock market as researching samples and use the absolute value of discretionary accruals to proxy for audit quality, then choose 7 variables from the five aspects affecting branch offices' audit quality and put them in a multiple linear regression model to find out their relation with the audit quality. The empirical findings show that the degree of headquarters' control, the audited company's profitability and the geographical proximity have positive correlations with branch offices' audit quality, while the client importance and client's location have negative correlations with branch offices' audit quality and branch office's size and location has little effect on branch offices' audit quality.