| Merger is a way of great significance for public accounting firms to develop and become bigger and stronger.By referring to the development history of the international “big four” accounting firms,it is obvious that all of them have ranked tops in the auditing community by multiple mergers and continuous integration.The accounting firm in China started later than the “big four”,and it is difficult for them to develop into large-scale accounting firms by achieving core competitiveness within a short period of time.Therefore,merger is also a must for the development of accounting firms in China.Merger will have accounting firms achieve large-scale development,but it will also bring some negative impact on accounting firms,such as the phenomenon of client loss during the consolidation of the post-merger period.In 2013,RSM and Crowe Horwath merged to become Ruihua Certified Public Accountants.But in the year of merger,27 listed company clients were lost.The number of lost clients was higher than that of before and after the merger.Therefore,the study of client loss in the process of merger in China has great practical significance.This article is based on domestic and foreign scholars’ theories related to the merger of accounting firms,changes in auditors,and audit quality.It uses literature research methods,case analysis methods,comparative analysis methods,and empirical analysis methods to study the client loss issues in Ruihua’s merger process.To be more specific,this article discusses the changes in the client portfolio before and after the merger of Ruihua and analyzes the client loss in the change of client portfolio and the characteristics of the lost clients.By combining auditor change theory with the audit opinion,the influencing factors for the loss of clients’ choices to change their firms during the Ruihua merger are further explored,such as the listed company’s financial status,audit fees,and signed certified public accountants.This article also studied the characteristics of clients who left the former Ruihua together with their CPAs after Ruihua’s merger,analyzed and compared their audit fees,audit quality,and audit tenure before the merger with other Ruihua clients.Follow-up analysis was conducted in order to discuss its audit fees and audit opinions in the new auditing firms.Through the research on the case of client loss in the 2013 Ruihua merger,this paper finds that after the merger,Ruihua’s client portfolio has been optimized and the client industry distribution has become more reasonable,enjoying the scale effect brought about by the merger.Audit opinions,company financial status,audit fees,company scale expansion and financial distress(whether it has been ST),and signed-off CPAs may all be the reasons for losing clients to change auditors.In addition,the regression analysis results show that business performance(ROE)has a significant impact on the reduction of Ruihua’s clients during the merger year.The audit quality of the clients following the signing CPAs after the merger was lower than that of the other Ruihua clients before the merger.The research implications of this paper are that accounting firms should take steps to optimize client structure in the merger process,strive to retain quality clients,and avoid large-scale loss of clients.Regulatory agencies must also implement a strict rotation of signed CPAs to improve auditor independence and audit quality. |
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