Research On The Correlation Between The Size Of The Accounting Firm And The Earnings Management Of The Audited Object

As an important part of the high-end service industry, certified public accountant industry has been highly concerned by all sectors of society. It maintains the principal-agent relationship between the owner and the manager from the angle of the independent third party, which enables the capital market to operate effectively. In our country, the problem of earnings management is widespread, in order to restrain the behavior of earnings management, the owners of the enterprises choose to hire accounting firms to conduct a comprehensive audit of the company's management. However, different accounting firms, audit quality of service is different, the ability to inhibit the behavior of the listing Corporation earnings management will be very different. Under this background, this paper aims to study the correlation between the size of accounting firm and the earnings management of the audited object, and discuss the ability of different size firms to inhibit the earnings management of the listed Companies, guide enterprises to choose the accounting firms scientifically and effectively, and to promote the healthy development of the audit market. It is also conducive to the improvement of the current situation of earnings management to find the right direction.This paper consists of three parts, theoretical research, empirical research and case analysis. First, this paper expounds the research background, research significance and research content. To audit service as the starting point, the theoretical research part summarizes the relevant theory of the accounting firm scale expansion and the earnings management firstly, and then defines the concept of the earnings management, deeply discusses the correlation between the size of accounting firm and the earnings management of the audited object. On the basis of summarizing the existing research, the measurement models of earnings management are analyzed, and the cross-sectional modified Jones model is proved to be more effective in quantifying earnings management. In the part of empirical research, this paper chooses the financial data of Shanghai and Shenzhen A-share of 2008 listed Company in 2014 as the research sample. The cross-sectional modified Jones model, descriptive statistical analysis, Pearson correlation analysis and multiple linear regression models were used to analyze the correlation between the audit income and the earnings management of the audited object, the correlation between the CPA population and the earnings management of the audited object, and the correlation between the number of customers and the earnings management of the audited object. In the part of case analysis, this paper selects the ZHONGSHEN HUAYIN WUZHOU CPA Firm, using descriptive statistical analysis and paired samples t test method, by comparing the extent of earnings management before and after the size of auditing firm changes, to verify the correlation between the size of auditing firm and earnings management of the audited object.The research results show that there are negative correlations between the audit income and the earnings management of the audited object, the CPA population and the earnings management of the audited object, the number of customers and the earnings management of the audited object. Among them, the negative correlation between the audit income and the earnings management of the audited object, and the negative correlation between the CPA population and the earnings management of the audited object are very significant. In addition, through the case analysis of one of the accounting firms, the paper finds that with the enlargement of the size of accounting firm, the earnings management of the audited object is also reduced, so the hypothesis of this paper is further demonstrated. According to the research results, this paper puts forward the corresponding countermeasures and suggestions from three angles. Generally speaking, the size of accounting firm has a certain effect on the earnings management behavior of our country's enterprises. The bigger the size is, the more powerful it is to restrain the earnings management. But in the large-scale development of the accounting firms, the government's lack of supervision and the imperfect legal system sometimes hinder the improvement of the execute ability of accounting firms.