Preventive Supervision And Audit Quality

With the development of the capital market,all parties in the market have more and more demands for high-quality information,and audit firms,as the subject of auditing,have received more attention.On August 31,2011,the Chinese Institute of Certified Public Accountants(CICPA)formulated the "Working Procedure for Audit Supervision of the Annual Reports of Listed Companies".The working procedure pointed out that in order to strengthen the supervision of the audit work of the annual reports of listed companies,the CICPA should interview with audit firms timely to prompt the possible risks in the audit work of the annual report.This measure is a preventive supervision of audit firms in China,which provides the favorable conditions for this paper to study the influence of CICPA's preventive supervision on audit quality.Taking a-share listed companies from 2010 to 2014 as samples,this paper adopts the difference in differences model to study the impact of preventive supervision on audit quality,that is,whether the audit quality changes after the audit firm is interviewed.The study found that the audit quality was significantly improved after the audit firm was interviewed.Further studies have found that the improvement of audit quality after the interview of larger audit firms is more obvious than that of smaller audit firms.At the same time,we also found that the audit fees of the interviewed audit firms have also increased after the interview.