The Empirical Study On The Impact Of Audit Market Structure On Audit Quality

In the 1980 s,China's audit market was established.The auditing failures of "Xin Dadi" in 2012,"Huarui Wind " in 2015 and "JinYa Science and Technology" are emerging in an endless stream.These failure cases make the accounting firm's reputation suffered serious negative effects,impair the interests of the clients and prevents the long-term maintenance of good clients relationship,and even eventually lead to the failure of the accounting firm.At the same time,the failure of auditing leads enterprises to transmit the wrong message to the society,influence market efficiency and impair the orderliness of market economy.The negative impacts of audit failure has led the public to focus on the audit industry and to question its quality.Scholars are racing to study ways to improve audit quality.Audit quality can be used to evaluate audit market performance.Many scholars started with the study of the audit market structure and started their research on the impact of audit quality.Statistics show that the audit market structure of China has changed from the III(upper)centralized oligopoly type in 2014 and 2015 to the IV(lower)centralized oligopoly type in 2016.What factors will affect the audit market structure,how and to what extent they affect the quality of audit,how to improve the audit quality is the problem to be solved in this paper.This paper first elaborates the research background and research significance,reviewed domestic and foreign literature.The research methods and contents of this paper are also introduced.Then the relevant concepts were defined.Secondly,using Marshall conflict,industrial organization theory,principal-agent theory and reputation theory to analyze the affect of audit market concentration,the professional expertise of accounting firms and entry barrier on audit quality.Then the research hypothesis of this paper were proposed.This paper selects Shanghai and Shenzhen main board listed companies from 2014 to 2016 as the research object.The audit quality is interpreted as the variable.The absolute value of discretionary accruals in listed companies is an alternative indicator of audit quality.The audit market structure is the explanatory variable.Auditing market structure is measured by three indexes: audit market concentration,the professional expertise of accounting firms and barriers to entry.Then,this paper constructed a multiple regression model and conducted empiricalanalysis,including correlation analysis,regression analysis and robustness test,in order to study what kind of relationship exists between audit market structure and audit quality.The empirical results show that there is a significant negative correlation between the three explanatory variables and the explained variables.Based on the empirical results,this paper draws the conclusion and puts forward the following suggestions: to establish a high concentration of oligopolistic audit market structure;emphasize the professional expertise of accounting firms;and raise the industry barriers to entry.