The Relationship Between Disclosure Of Illegal Information And Audit Quality Of Accounting Firms

Being the information media in the stock market,Audit Reports play an important role in supervision of the government,investment of investors and the development of compani es.Accounting firms are the auditors of the financial information.Consequently,the study of wrongdoing of accounting firms bears on the normal market order.In this paper,we choose year from 2007 to 2014,and collect penalty notices on accounting firms from the site of China Securities Regulatory Commission(CSRC),in order to study the impact of administrative penalties acting on the behavior of auditors.Discretionary accruals used for the substitution variable of audit quality,this paper analyzed the relationship between information disclosure and audit quality by the modified Jones model.Research shows that there is a relation between the disclosure of violation information and audit quality of accounting firms.In this paper,we choose year from 2007 to 2014,and collect penalty notices of accounting firms to study the impact of administrative penalties acting on the behavior of auditors.We use the theory of government regulation,auditor reputation and theory about administrative penalties on auditor behavior.We tested the hypothesis by descriptive analysis,sample group and regression by least square method.Firstly,with the collected punishment information,we chose the comparing sample by strict standards;secondly,we explored the changes of the audit quality before and after the punishment disclosure;thirdly,we studied if there is a relationship between types of punishment and audit quality.Lastly,the paper gives suggestions for supervise of CSRC.We should strengthen the intensity of government administrative supervision,improve the mechanism of the administrative penalty,standardize the order of audit market better and better.Only in this way can auditing provides a healthier environment for the development of stock market.We analyzed the influence of the disclosure of violation information with the substitution variable of discretionary accruals.The result shows that the audit quality changes significantly before and after the disclosure.In addition,the more serious type disclosed by CSRC,the more obvious changes take place after the disclosure.It can be inferred that the penalty methods taken by CSRC will improve the audit quality,safeguard the auditing market order,and promote the healthier development of the capital market.