Administrative Penalties And Audit Quality

With the development and expansion of Chinese auditing market,auditing attracts more and more attention as a service that provides credibility.In recent years,there have been a series of financial scandals such as Dengyun shares,Wanfu Biotechnology and Greenland,which knocks the alarm on the auditing market.As one of the regulators of the auditing market,CSRC conducts administrative punishments on CPAs and accounting firms that violate the relevant laws and regulations.Based on this background,it is of theoretical value and practical value to study the influence of administrative punishment on the audit quality.This paper reviews the relevant literature on audit quality,government supervision and the impact of government regulation on administrative penalties.By using the basic theories such as reputation mechanism,legal mechanism,audit failure theory and market failure theory,this paper analyzes the necessity of administrative punishment in the audit market and the mechanism of administrative punishment influence audit quality.On the basis of literature,theory and background,this article puts forward hypotheses and models for empirical analysis.In this paper,the administrative penalty cases that the CSRC imposed on Chinese audit market from 2001 to 2016 are used as the research materials.Based on the previous research,this paper pairs the punished accounting firm and CPAs with the unpunished ones,and use the thought of Difference-in-Difference to control unobservable factors.The result of this study finds that the audit quality of accounting firm is improved after the sanction.This improvement is also significant when the control group joined.In the CPA dimension,-the CPAs which left behind in the punished firm have observed the improvement on the audit quality.Different from the above conclusion,the result of the CPAs who have switched to unpunished firm shows no improvement on the audit quality.In addition,there is no significant relationship between the punishment intensity and the improvement of auditing quality.Finally,it is suggested to improve the efficiency of govermment supervision,improve the system of civil liability,standardize the disclosure of regulatory information and strengthen the regulation of illegal firms and CPAs after punishment to promote the sound development of the audit market.