Legal Background Executive,Earnings Management And Audit Opinion

Against the background of the general separation of ownership and management rights in modern enterprises,the role of CPAs is increasingly receiving widespread attention from governments,investors,and all sectors of society.As the final product of audit work,audit opinions are used by certified public accountants to express their final judgment on the quality of financial reports.At the same time,earnings management is an important indicator for the firm to determine the price of customer auditing business services.It means that the management of an enterprise uses accounting methods or manipulates real transactions to change the content of financial reports in order to mislead stakeholders' understanding of the company's performance.Previous research found that earnings management behaviors of enterprises often increase the difficulty and risk of auditors.When auditors face high audit risks,they are likely to issue non-standard audit opinions.At the same time,in recent years,more and more companies realize that the company's business management will be greatly affected by the characteristics of the company's executives,the professional characteristics of executives with a legal background,and the company's earnings management.Risk activities have a certain preference,which will have a greater impact on the company's audit opinions to a certain extent.The research object of this article is A-share listed companies in Shanghai and Shenzhen from 2012 to 2018.Using a combination of theoretical analysis and empirical testing,the company's earnings management and audit opinions are regressed based on whether the executives have a legal background,and explore how legal background executives influence the relationship between audit opinions and earnings management.In addition,the listed companies are divided into state-owned enterprises and non-state-owned enterprises according to the nature of property rights to test the impact of legal background executives on the company's earnings management and audit opinions in enterprises with different property rights.Research shows:(1)Executives with a legal background are negatively correlated with earnings management and are stronger in state-owned enterprises.(2)Legal background Executives have a negative correlation with the probability that a company is issued a non-standard audit opinion and is stronger in state-owned enterprises.(3)Earnings management is positively related to the probability of the company being issued a non-standard audit opinion.(4)Legal background Executives can reduce the positive correlation between earnings management and the probability that a company is issued a non-standard audit opinion.This article believes that the possible reasons are:in state-owned enterprises,legal background executives play more "supervisory functions",monitor the company,ensure that the company operates within the law,and reduce similar high-risk activities such as tax avoidance and earnings management.To achieve the purpose of improving audit quality and reducing audit risks,thereby reducing the probability of being issued non-standard audit opinions;In non-state-owned enterprises,executives with a legal background play more "promoting functions" to help companies circumvent laws and regulations,thereby making the company's behaviors more aggressive,more daring to take risks,and playing more "skimming," the more likely the company is to conduct earnings management Activities,such as high-risk activities,increasing the probability of being issued a non-standard audit opinion.The innovations of this article are as follows: first,the economic consequences of executives with legal background are expanded to a completely new area of audit opinions;second,the first discussion on the legal management of earnings management and the relationship between earnings management and audit opinions Thirdly,the economic consequences of executives with legal background were tested for the first time by distinguishing the nature of property rights;and fourthly,research on the characteristics of the company's influencing factors on audit opinions was enriched.