Earnings Co-movements,Product Market Competition And Audit Opinion

The audit opinion is a objection of whether the financial report of the audited entity was reflected in accordance with relevant accounting standards.audit opinion is always a hot spot for information users.The influencing factors of audit opinions have also been the focus of academic research.This paper studies the relationship between earnings co-movements,product market competition and audit opinion.Before this,the research on the influencing factors of audit opinions mainly focused on the characteristics of the enterprise,the external environment,and the characteristics of accounting firms.As well as the company's characteristics,earnings co-movements has not been studied by scholars on its relevance to audit opinion,this paper attempts to studies the relationship between earnings co-movements,product market competition and audit opinion,in order to expand the theory of the factors affecting audit opinions.Earnings co-movements is the degree to which the earnings of a company is affected by the average earnings level of the same industry.companies with low earnings co-movements have lower comparability with other companies in the industry.Their financial information is more unpredictable and the degree of information asymmetry is higher.Based on the theory of information asymmetry,corporate fraud theory and modern competition theory,this paper discusses the relationship between earning co-movements,product market competition and audit opinion,and proposes hypotheses.Secondly,this paper collects data of 2010-2016 listed companies in Shanghai and Shenzhen stock markets from the wind database and Csmar database.Through descriptive statistics,correlation test and multiple regression analysis,this paper analyzes the relationship between earnings co-movements and non-standard audit opinions,and the moderating effect of product market competition on the relationship between earnings co-movements and non-standard audit opinions.Subsequently,the paper also subdivides the sample into two sub-samples: state-owned enterprises and non-state-owned enterprises,research on the relationship between earning co-movements,product market competition and audit opinion of listed companies with different property rights.In further research,this paper examines the correlation between earning co-movements and irregularities,and the theoretical analysis is verified.Finally,based on theoretical analysis and empirical test results,this paper draws conclusions and suggestions.The research in this paper finds that:(1)Listed companies with high degree of earning co-movements are more likely to obtain standard unqualified audit opinions than listed companies with low earnings co-movements;(2)Product market competition has a positive moderating effect on the negative correlation between earnings synchronization and audit opinions.Fierce product market competition will aggravate the operational risk of enterprises.Listed companies with low earnings co-movements have a higher degree of information asymmetry.At the same time,they have the pressure and opportunities of fraud.They are likely to conduct earnings management.Therefore,auditors are more likely to issue non-standard audit opinions to them.(3)It is found that compared with state-owned enterprises,the positive regulation of product market competition in non-state-owned enterprises is more significant.This paper argues that this is due to the fact that under the same product market competition,non-state-owned enterprises actually suffer from higher competition pressure,operating pressure and innovation pressure than state-owned enterprises with political connections.(4)Considering that earnings co-movements and earnings management may effect each other,this paper uses the samples of listed companies which violate the rules,and empirically tests the correlation between earnings co-movements and listed companies' violations.Research finds that there is a significant negative correlation between earnings co-movements and listed companies' violations.Thus,the theoretical analysis is confirmed.And the earnings co-movements may be used as a warning signal for the supervision department to detect the violation of the listed company.The main innovations of this paper are as follows:(1)revealing the correlation between the earnings co-movements and audit opinions of listed companies,enriching the research on the influencing factors of audit opinions;(2)This paper studies the relationship between earnings co-movements and listed companies' violations,verifies the scientific nature of the theoretical analysis,and makes the results of the paper more reliable.