Auditor Reputation And Securities Analysts' Attention

Auditor reputation mechanism refers to the market mechanism which can work to improve the auditor quality by abduction or restraint from auditor reputation, in the consensus that auditor reputation can represent audit quality. There are two necessary conditions that can affect the reform and work of the mechanism:first, the auditor reputation as an alternative display signal is effective, the auditor reputation is high, their job is high-quality, accordingly lower conversely; Second, market participants have the same consensus that auditor reputation can represent audit quality, and then they will make their decisions about economic issues according to the information about audit reputation they get.This paper proposed an empirical investigation to study one of the essential conditions of the auditor reputation mechanism, namely, whether securities analysts pay attention to auditor reputation and put the information of auditor reputation they get into reports of value analysis and forecast they offer to their customers.This paper selected certified public accountants punished by the China securities regulatory commission during 2007-2012 as the research samples that are suffering the damage of audit reputation., selected some other accountants whose reputation wasn't damaged as the reference sample. And then examine whether the earnings forecast made by securities analysts had been affected by audit reputation damage. Significantly.The empirical results show that compared with the reference sample, securities analyst gave out earnings forecast with different prediction behavior characteristics and prediction results. Obvious changes have taken place because of the audit reputation mechanism. In particular, the frequency of adjustment and the degree of dispersion have increased significantly. This result can support the preliminary effectiveness of auditor reputation mechanism in the industry of securities analysts.This conclusion has policy implications for our policy makers. Policy makers need to do something to promote some other necessary conditions that can support the audit reputation mechanism. On the one hand, increase the degree of attention of a securities analyst on audit reputation, and guide the securities analyst information transfer mechanism to be mature and perfect; on the other hand, the formation of auditor reputation mechanism should be guided for create conditions for the auditor reputation damage mechanism and action mechanism. Finally realize the function of auditor reputation mechanism in the aid of securities analyst industry, and help it to play its role of the audit market resource allocation.