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The Study Of The Effect Of Political Connections On Auditor Selection And Audit Opinion In Non-state-owned Enterprises

Posted on:2020-03-02Degree:MasterType:Thesis
Country:ChinaCandidate:Y HongFull Text:PDF
GTID:2416330590470997Subject:Audit
Abstract/Summary:PDF Full Text Request
It has been more than 30 years since the reform and opening up,and China has preliminarily set up the mechanism of market.However,the fact is that government still plays a very important role in capital market in that it can exert influence on resource allocation.Due to this complicated relationship between Chinese government and the market,Chinese enterprises are keen on establishing relations with the government.Given that state-owned corporations are ultimately owned by the state and controlled by the government,state-owned corporations are naturally born with political connections.On the contrast,non-state-owned enterprises do not have such unique conditions.They have to seek actively for the political connections,so private enterprises' active participation in political affairs seems to be inevitable.At the same time,non-state-owned economy has developed quickly and become the pillar of national economy,so this paper focuses on the political connections of nonstate-owned corporations.The existing research shows that the government can act as a "helping hand" in the process of associating with enterprise,and can build a reciprocal relationship.These non-state-owned enterprises with political connections can obtain an extra reward from such relationship.In addition,there are also studies found that political connections sometimes become "grabbing hands",providing opportunities for senior executives to seek rent and corruption,which would bringing negative impacts on business operations.A major feature of the agency problem of listed companies is the conflict of interests between the major shareholders and the minor shareholders and political connections often exist in the top managers or board members of enterprises.Therefore,non-state-owned enterprises with political connections usually have more serious agency problems.In this case,independent external supervision is particularly important to corporations,and auditing is exactly an effective way that listed companies tend to choose.High-quality audit can play a substitute role when the external legal environment is not perfect,and the final audit opinions can help investors evaluate listed companies and then make investment decisions.Besides,due to the differences in qualification,reputation,scale and staffs quality,quality of audit services that different accounting firms can provide is also different.Therefore,many scholars divide accounting firms into large one and small one,so as to study whether different offices have different impacts on enterprise management.In addition,does the existence of political connections have any influence on auditing in non-state-owned enterprises? What kind of influence does it have? And will it affect the preference of firms in selecting auditors? Are enterprises willing to choose big auditing firms to deliver a good signal,or local small firms to cover up the possible benefits that come from political connections? What is the impact on the final audit opinion? All these problems above are what we are going to study in this paper.This paper studies the influence of political connections on auditor selection and audit opinion by taking non-state-owned A-share listed companies from 2010 to 2016 as research samples,and by the methods of literature analysis,data analysis and case analysis.On the basis of collecting the existing literature,this paper analyzes and reviews theories related to political connections,like rent-seeking theory and relational capital theory,and theories related to auditor selection including agency,information asymmetry theory and insurance hypothesis.Furthermore,this paper puts forward assumptions and confirms that under certain other conditions,private listed companies with political connections are less likely to employ local small firms.Private listed companies with political connections are more likely to get a standard audit opinion.And following the principle of sampling,this paper chooses a private listed company---BINJIANG REAL ESTATE GROUP as the case and analyzes how its political connections affect auditor selection and audit opinion.
Keywords/Search Tags:Political Connections, Auditor Selection, Audit Opinion, BINJIANG REAL ESTATE GROUP
PDF Full Text Request
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