Research On The Relationship Between Controlling Shareholder Pledge And Audit Opinion Shopping

With the continuous development of the capital market,equity pledge financing,as an emerging financing method,is increasingly favored by shareholders of listed companies by virtue of its convenience and speed.Equity pledge refers to the act of a stockholder applying for a loan to a financial institution or providing a guarantee for a third-party loan with the equity owned by the stock as the pledge.In the case that the controlling shareholder of a listed company has cash demand,although they can raise funds by reducing the shareholding,it may bring a chain reaction of stock price decline;if they choose bank credit loans,there will be strict approval procedures and lengthy waiting time.Therefore,borrowing by equity pledge seems to be a better way of financing.On the one hand,it can avoid complicated approval procedures.On the other hand,this financing method is more flexible,and even restricted stocks can be used for loans.However,while the equity pledge brings financing convenience,there are also some risks that cannot be ignored.For the controlling shareholders who use the stock pledge to finance,the biggest problem they face is the possible risk of transfer of control.During the equity pledge period,the controlling shareholder has a strong stock market value management incentive to stabilize the stock price in order to prevent the stock price from falling,which results in the joint effect of additional margin,pledge and even loss of control.One of the possible ways to achieve this is to manipulate the disclosure of information.The audit opinion is the final result of the auditor's completion of the audit work.It can reflect the quality of the accounting information of the financial statements of the enterprise to a certain extent.It is one of the important infonnation that affects the investor's investment decision.The announcement of the audit opinion plays a crucial role in judging the trustworthiness of the listed company's financial report in the stock market.If a listed company is issued a non-standard audit opinion,it will inevitably have a certain negative impact on the stock price,causing stock price fluctuations,affecting the company's reputation,and even causing the regulator's focus.Therefore,when the listed company shareholders have the motive of market value management and want to disclose the manipulated financial statements,they need to be approved by the auditors.They hope that the auditors will issue standard unqualified opinions,which will lead to the purchase of audit opinions.Therefore,this paper believes that during the equity pledge period,the controlling shareholder may manipulate the audit report through the way of audit opinion purchase,so that the auditor can issue standard unqualified opinions on the financial statements that have been decorated to achieve the motive of market value management.Based on the full review and research of relevant literatures at home and abroad,this paper combines qualitative analysis with quantitative analysts,normative analysis and empirical analysis,and takes a sample of A-share listed companies in Shanghai and Shenzhen from 2012 to 2016 as a sample.In this way.we can study the impact of the equity pledge of the controlling shareholder of the listed company on the abnormal audit fees,and further distinguish the influence of the transparency of the company's information and the number of analysts' tracking on the correlation between the two,derive the impact mechanism of equity pledge on the purchase of audit opinions.The results of the study found that:(1)when the conditions are the same,in contrast to listed companies whose controlling shareholders have not made equity pledges,the listed company auditor who has this behavior will receive the abnormal audit fees paid by the customer for the purchase of the audit opinion.(2)When the information transparency of the listed company is high,the listed company and the auditor will weaken the audit opinion purchase behavior because of the pressure to disclose the true and effective accounting information.(3)The analyses emphasis on listed companies can weaken the positive correlation between the controlling shareholder's equity pledge phenomenon and abnormal audit fees at a certain level.This paper attempts to make certain supplementary contributions in the following aspects:(1)The existing research on the correlation between the controlling shareholder's equity pledge and auditor's fees is based on the auditor's perspective of avoiding audit risk and thus improving audit fees.There is no relevant research on the audit opinion purchase by the controlling shareholder and the auditor.This paper enriches the economic consequences of controlling shareholder pledge from the perspective of audit opinion purchase.(2)This paper further deepens the research on the influencing factors of audit opinion purchase.Previous studies have found that listed companies' restatement of financial statements,the issuance of equity incentive plans,and refinancing will lead to the purchase of audit opinions.No research has involved the relationship between the controlling shareholder's equity pledge and the audit opinion purchase behavior.(3)The research in this paper can effectively discover and suppress and help regulators to formulate more reasonable and accurate regulatory policies,It provides a new perspective and direction for the development of China Institute of Certified Public Accountants and other auditing regulatory departments,helping them to better formulate relevant auditing regulations and implementation guidelines,and enhance investors' confidence in CPAs.