Conversion Of Accounting Firms,Auditor Reputation And Audit Quality

Law and reputation have great influence on auditors' behavior.Since 2010,ministry of finance combined other related department imposed a series of laws which define detailed regulations on the constitution of accounting firms.It requires international and local accounting firms who has qualification transfer organizational forms.The government has adjusted the regulation from"be bigger and stronger" to "be stronger and bigger" in recent years.They lay great importance on the reputation construction of accounting firms to establish rules.Based on the background of the law and reputation,the paper choose 2009-2014 A-share listed companies of Shanghai and Shenzhen as the example to test the influence of the laws and reputation on behavior.The degree of earnings management and type of audit opinion are chosen as the proxy variables.Whether changing to special partnership and audit reputation are chosen as standard to test by groups.The results show that if the size of company and the ability to make money are set as a constant,there is no significant difference on degree of earnings management and type of audit opinion in accounting firms with low reputation whether they switch organizational forms or not;while accounting firms with high reputation are more likely to depress the degree of earnings management and sign nonstandard type of audit opinion after switch to special partnership.Before changing to special partnership,there is no significant difference on degree of earnings management and type of audit opinion between low and high reputation accounting firms;while after changing to special partnership,accounting firms with high reputation are more likely to depress the degree of earnings management and sign nonstandard type of audit opinion than accounting firms with low reputation.The results indicates that the mechanism of auditor reputation is the foundation of the law playing a role;in reverse,the mechanism of auditor reputation playing a role depends on the sound law system.