An Empirical Study On The Relationship Between Audit Market Competition And Opinion Shopping

Many of the behaviors of listed companies in the capital market will be affected by the types of audit opinion.Inappropriate audit opinion may bring bad economic consequences to the company,which makes the listed companies have the incentive to buy audit opinion from accounting firms(opinion shopping).Opinion shopping challenged the independence of the auditors,reduced the quality of the audit,and disrupted the order of the audit market,which caused widespread concern by the regulators.Currently,the policy makers for the opinion shopping mainly focus on the enterprises,while ignore the audit services provider-accounting firms.In fact,the realization of opinion shopping is the result of coactions between enterprises and accounting firms.Therefore,the policy makers should not only consider the purchase motivation of the enterprise,but also think of whether the accounting firms have motivations to cooperate with enterprises to achieve the opinion shopping.The incentives of accounting firms depend more on the audit market competition and their performance may be different in customers with different audit market competition.Conforming the relationship between the audit market competition and the opinion shopping is not only beneficial to the discovery of audit collusion,but also can provide reference for investors to make the investment decision and for regulators to develop proper policies.In literatures,foreign studies have not reached a definite conclusion(Terrence,1994;Newton,2013).Domestic researches focus on empirical evidence of opinion shopping from the perspective of the enterprises(Li Qingyuan,2014;Zhai Shengbao,2016).However,from the perspective of audit market competition,there are only theoretical discussions,lacking the empirical evidence.In this article,the object of study is the Shanghai and Shenzhen A-shared listed companies from 2011 to 2015,and the impact of different audit market competition on opinion shopping was examined based on the audit opinion of Lennox(2000).To achieve a convincing result,the degree of market competition was measured by analyzing market concentration rate by province and sub-sectors and Heffindale index.Further,October 1st was regarded as a time point for the auditor change time which occurring after October 1st is a later change.Thus,the relationship between auditor change time and opinion shopping was studied with different audit market competition.The study found that when the audit market competition is high,the listed companies are more likely to achieve the opinion shopping.Furthermore,the result of analyzing different auditor change time demonstrated that opinion shopping is more likely to occur when auditors changed later and audit market competition is high.The conclusion of this article provides empirical evidences to the relationship between opinion shopping and audit market competition,and the relationship between opinion shopping and auditor change time.