The Demand Of High Quality Audit And The Role Of Audit From Double Principal-agent Perspectives

With the development of modern enterprises, the separation of ownership and control led to the agency problem between shareholders and the management, on the other hand, the increasing number of shareholders led to the agency problem between major shareholders and minority shareholders. Corporate Governance is committed to alleviate agency conflicts that exist within the enterprise to reduce agency costs. As an important mechanism of corporate governance, external auditing plays an important role of alleviating agency conflicts.From dual principal-agent perspectives, this paper empirically examines the relationship between the two types of agency conflicts and external audit. The empirical results show that the higher executives are paid abnormally, the greater the probability that companies have selected Big Four is, which indicates the more serious the first class of agency conflict is, the stronger the demand for high-quality audit is. The higher the degree of occupation of funds by major shareholders is, more reluctant companies are to select Big Four, indicating the more serious the second class of agency conflict is, the weaker the demand for high-quality audit is. Abnormal executives' salary does not significantly affect the audit opinion, which shows that external audit can't effectively identify non-normal executives' salary. The higher the degree of occupation of funds by major shareholders is, the greater the probability that companies are issued an atypical opinion is.