Litigation Risk? Low_balling And The Earnings Management

The convening of the Nineteenth Congress accelerated the pace of reform of the auditing system.In recent years,low_balling activities by accounting firms have occurred frequently,the quality of audits has been declining,and corporate earnings management practices have intensified.It is not uncommon for audit firms to make mistakes.For example,in December 2017,Shin Wing Certified Public Accountants Co.,Ltd.was subject to the administrative penalty of the China Securities Regulatory Commission due to the false records of the audit report issued by Deng Yun shares in the 2013 annual report.However,due to the continuous improvement of the external legal environment,lawsuits have played an increasingly prominent role in the resolution of disputes.In this context,clarification of the inherent risks of litigation risk,the relationship between low_balling and earnings management of auditors has certain practical significance.Then,will the company's earnings management activities increase as a result of low_balling? Will the increase in auditor's litigation risk weaken the relationship between low_balling and earnings management? If so,is there a significant difference in the regulatory role of litigation risk between big and small? Focusing on these issues,this article takes the 2007-2016 Shanghai-Shenzhen A-share listed company as a research sample,first collate and analyze previous relevant literature,then put forward hypotheses and construct empirical models through theoretical analysis,and then use multiple regression and other methods for research.Assume an empirical test.When examining the differences between institutions and small schools,this paper divides the basic sample into companies audited by the top ten firms and companies audited by non-ten major firms.They examine the risk of litigation,the low price of auditors and the corporate surplus.The relationship between management.The study found that,overall,the low_balling behavior of the firms will aggravate the earnings management of the company.There is a significant positive correlation between the two.The group inspection results based on the top ten and non-ten samples show that this relationship is mainly non-negotiable.The behavior of the top ten firms' low_balling behaviors did not significantly affect the earnings management activities of the top ten firms;the increase in litigation risk of the firms significantly weakened the low_balling behavior of the firms.The positive correlation between low_balling and corporate earnings management,in areas with higher litigation risks,the negative impact of low_balling behavior on earnings management has been weakened.However,the group inspection results based on the top ten and non-ten samples show that litigation This regulatory effect of risk is mainly found in the sample of audits by non-ten major firms and is not evident in the sample audited by the top ten firms.The research in this article will help enrich the literature on the economic consequences of firms' low_balling and help industry professionals deepen their understanding of the impact of low_balling on corporate earnings management activities from the perspective of litigation risk.At the same time,this article has certain reference value for how to standardize the audit pricing behavior of firms and their certified public accountants as well as the company's financial reporting behavior.The research conclusions of this paper can also provide some useful references for the regulatory authorities to formulate policies concerning audit supervision and pricing and improve the supervision ideas.