Research On Economic Consequences Of Administrative Punishment Of CPA Firms

The order in the capital market and the interests of investors were severely damaged by financial fraud and audit failure cases.All countries have tried to suppress the occurrence of audit failures by raising the level of supervision,mainly through the administration punishments.Through the administrative penalty announcement announced by the Securities and Futures Commission,it was discovered that Reanda Certified Public Accountants has been punished by the China Securities Regulatory Commission on several occasions in the past seven years.This can not help but think deeply.Why did Reanda repeatedly be fined and commit crimes?Can our country's administrative punishments achieve its proper function of correcting mistakes?Therefore,this paper selects Reanda Certified Public Accountants as a case study object,and whether the role of administrative punishment can be effectively used as a starting point for case studies,and conducts an in-depth study of the economic consequences and mechanism of the administrative penalty on accounting firms.The difference between the research ideas of this paper and existing research lies in the demonstration of the economic consequences of administrative penalties on firms in a single case study.What kind of economic consequences of administrative penalties on accounting firms has a direct bearing on the firm's ability to continue operations and its position in the industry,and it plays an important role in the development of firms.Most of the existing studies are analyzed from the perspective of empirical research.Although the correlation between administrative penalties and audit fees and audit quality can be tested,there are many problems.Due to the different models used by the scholars and the different samples used,disagreements have not yet reached a unified conclusion.And most of the studies have focused only on single aspects of auditing clients,audit fees,audit quality,and auditor behavior.These documents have not conducted in-depth studies on certain typical firms.This article introduces the relevant theory of auditing market and the related literature and theories of administrative penalties on the number of customers,firm's reputation,and audit quality.Starting from the perspective of economic consequences,the case study method has been used to impose numerous penalties on the China Securities Regulatory Commission.Reanda Certified Public Accountants conducts research in order to study the impact and administrative mechanism of administrative penalties on the economic consequences of accounting firms.We hope to supplement the research on the economic consequences of the administrative penalties of accounting firms and the effect of the CSRC's administrative penalties.This paper has the following research findings:(1)After an office is subject to administrative penalties,whether the number of customers,audit fees,or audit service revenue does not show a single linear change,but presents a change in volatility.This volatility changes related to the number of administrative penalties the firm received;(2)This article found that after the first administrative penalty was imposed on the accounting firm,the number of its customers,audit fees,and audit revenue did not decline because of the penalties.Instead,it would keep up with the overall market conditions.The quality of auditing has not been significantly improved,but it has continued to deteriorate.This shows that the first penalties did not have a negative impact on the firm;(3)After the firm's second penalties,the number of its clients,audit fees,and audit business income will decline rapidly and maintain a low level for a long time.The quality of the audit will also improve,indicating that repeated penalties will have a significant negative effect on the firm,and the firm will also take certain measures to improve the audit quality;(4)The economic consequences of administrative punishment are closely related to the firm's internal governance foundation,the auditing market demand and the macro environment.If the firm wants to improve the audit quality,it must pay full attention to its own internal governance issues and the corporate governance foundation of its audit clients.Otherwise,due to the impact of the macro anticorruption environment,administrative penalties will follow.The main innovations of this paper are;(1)To dig deeper into the changes in the number of customers,audit fees,auditing business income,and audit quality of the accounting firm after the administrative punishments of Reanda Certified Public Accountants;(2)Comparing the economic consequences of initial punishment and re-punishment,thus studying the impact of the number of penalties on the economic consequences of the firm;(3)A systematic and omni-directional analysis of the external and internal causes of the post-punishment audit quality is significantly improved.The enlightenment of this paper:Reanda as a domestic famous accounting firm,the reasons for its repeated administrative penalties and the resulting economic consequences,it is worthy of other accounting firms in China to prevent proliferation,take efforts to strengthen the firm's internal construction and audit quality,prevent Audit risk.It also sounded the alarm for China's supervisory authorities and must strengthen the effectiveness of industry supervision mechanisms.