Mandatory Rotation,re-appointment And Audit Quality Of IPO Signed Certified Public Accountants

Whether a signed CPA can maintain audit independence and express a fair and honest audit opinion has always been a key issue in the audit field.After the Enron incident,it was discovered that a longer audit term is likely to induce a collusion between the audited institution and the auditor.As a result,governments at home and abroad have introduced certain mandatory rotation policies to avoid the consequences of too long an accounting firm or a signed CPA in a certain company,which would impair audit independence.The China Securities Regulatory Commission also implemented the "Regulations on the Regular Rotation of Certified Accountants Signing Securities and Futures Audit Services" in January 2004.IPO signing CPAs have more special significance than ordinary signing CPAs,including because of their three-year plus one IPO audit time,which makes their audit term longer,and their accumulated experience and knowledge about the auditee.And more professional,and after the IPO of the company,it is more likely to assist the company to manage its earnings in order to avoid the suspension of issuance due to poor performance within a few years after the meeting.The "Regular Rotation Regulations" also specifically proposes a corresponding term limit plan for IPO signing CPAs,that is,after the audited institution is listed,it must be forced to rotate for a maximum of two consecutive terms.However,few existing studies have specifically analyzed and discussed this situation,and have not analyzed the effectiveness of this policy.This article uses the financial data of 2004-2018 of companies listed on the Chinese A-share market from 2004 to 2015 as a samples,and specifically analyzes the effectiveness of the mandatory rotation policy for IPO signing CPAs and related behaviors to circumvent the policy,and subdivide the research sample through the variable of property rights to further analyze the research results.Different situations in state-owned and non-state-owned enterprises.The study found: Compared with ordinary signing CPAs,the audit quality of the IPO signing CPAs for continuous annual audit after listing will be worse;Compared with ordinary signing CPAs,the audit quality of the IPO signing CPAs will be better when they re-appoint the company's annual audit after mandatory rotation;Compared with state-owned enterprises,nonstate-owned companies' IPO signing CPAs have a larger range of earnings management and poorer audit quality when the company continuously performs annual audits after the company is listed;When the IPO is signed and the certified public accountants are re-appointed to the annual audit after the mandatory rotation,regardless of whether they are state-owned or non-state-owned enterprises,the margin management will be smaller and the audit quality will be better.Based on these research conclusions,this article puts forward certain policy recommendations,in the hope that it can help improve the mandatory rotation policy and standardize auditor behavior to make the capital market and audit environment more open,transparent,fair and just.