Risk Preference Of CPAs,Internal Governance Of CPA Firms And Audit Quality

Audit quality is the highest standard of evaluating audit work and the lifeline of audit work and even the operation of capital market.With the rapid development of China’s market economy and the improvement of the capital market,the users of financial statements pay more attention to the quality of accounting information of listed companies,and the requirements for audit quality are also increasing.In recent years,the frequent occurrence of financial fraud cases has aroused people’s renewed concern about audit quality.Financial fraud cases such as Wanfushengke,Dazhihui and Jiuhao Group have a negative impact on the whole capital market.This also makes people doubt the ability and credibility of CPAs.Under the risk-oriented auditing mode,as a direct auditing subject,not only the objective characteristics such as the qualifications and specialties of CPAs will directly affect audit behavior and audit quality,but also the subjective psychological characteristics such as risk preferences of CPAs,which are seldom recognized by people,will have a significant impact on audit judgment and thus affect the results of audit quality.In 2004,CIFIC began to implement the quality inspection system of accounting firms,but the results of the inspection in recent years show that some firms have not improved the internal quality control system,the relevant quality control policies are not perfect,and the program design is inappropriate or has not been effectively implemented.The internal governance of firms has become an important bottleneck restricting the development of firms,and also restricts the improvement of audit quality to a large extent.In 2012,the CPA Association of China initiated the establishment of the Internal Governance Steering Committee of CPA Firms.It is expected to basically formulate a set of normative system that can standardize the internal governance of CPA Firms and strictly control the internal management of CPA Firms.Based on the above background,this paper studies the relationship between CPA’s risk preference,internal governance and audit quality through normative analysis and empirical analysis.The content of this paper is divided into the following parts.The first part is the introduction.In this chapter,the background of this study and its significance are explained in theory and reality.The second part is the literature review,sorting out the previous literature related to the content of this study,and summarizing them,leading to the content of this study.The third part,first of all,puts forward the theoretical basis of the research and application of this paper,and combines it with the content of this study to analyze,and puts forward the hypothesis of this paper.The fourth part is to select the appropriate variables and data to build the model.The fifth part,according to the model constructed above,chooses the appropriate method,carries on the empirical test,and carries on the analysis to the empirical result.The sixth part summarizes the empirical test results,draws the conclusions and Enlightenment of this study,and puts forward relevant policy recommendations.This paper chooses Shanghai and Shenzhen A-share listed companies in China from 2014 to 2018 as the research sample to empirically test the relationship between CPA’s risk preference,firm internal governance and audit quality.The findings of this study are as follows:(1)The higher the risk preference of CPAs,the lower the audit quality.(2)The better the internal governance of firms,the higher the audit quality.(3)The internal governance level of firms can restrain the reverse effect of CPA’s risk preference on audit quality.The innovation of this paper is that,from the perspective of risk preference of CPAs,this paper combines the characteristics of CPAs and the characteristics of accounting firms to study their impact on audit quality,which is conducive to broadening the perspective of audit quality research.On the basis of theory,risk-oriented theory,bounded rational decision-making theory,risk preference theory,high-level echelon theory,principal-agent theory and autonomous governance theory are applied to the study of audit quality,which expands and enriches the theoretical basis related to the study of audit quality.The practical significance of this paper lies in:firstly,it is helpful for accounting firms to take relevant measures from the perspective of auditor’s risk preference and internal governance,to avoid audit risks to the greatest extent,to complete audit tasks and to improve audit quality.Secondly,it is helpful to provide investors with relevant reference information and help them to judge the audit quality,so as to make correct decisions.Thirdly,it is also helpful to provide policy recommendations for reference,strengthen the internal governance supervision of firms and the construction of excellent audit team.