Study On The Impact Of The New Securities Law On The Structure Of Securities Audit Market And The Behavior Of Market Players

In recent years,with the increasing volume and internationalization of China’s economy,the reform of China’s capital market has entered deeper water,and the new Securities Law came into effect on March 1,2020.Auditing has also been affected by the new Securities Law.The implementation of the new Securities Law has expanded the scope of legal liability for securities service providers and increasing the intensity of violations undertaken by accounting firms.Therefore,after the implementation of the new"Securities Law",what changes will occur in the audit of the annual reports of listed companies by accounting firms?With more firms entering the audit market,how will listed companies,as the demand side of the audit market,make their accounting firm selection?How will the audit market structure change under the new Securities Law as the behavior of both sides of the audit market changes?These are all questions worth studying.Through literature review,we found that the implementation of the new Securities Law has brought about new changes in the audit market and has had a profound impact on the behavior and structure of the audit market.Foreign research on the audit market is generally earlier than that of China.Foreign research on audit market regulation has focused on the regulation itself and the economic consequences of the regulatory changes,while China’s research on audit market regulation has focused on the regulation itself and less on the economic consequences of the regulatory changes.In terms of the impact of the new Securities Law on audit market behavior,domestic literature tends to explore the impact only from one side of the audit market,and does not explore the effect of the regulatory change from the perspective of the choice between the supply side and the demand side of the audit market,and lacks field research.To this end,this paper further investigates the impact of the new Securities Law on the structure and behavior of the audit market.In view of this,this paper begins with a literature review to summarize and review the literature on audit market regulation,the impact of the new Securities Act on the audit market,and the audit market structure;secondly,it analyzes the emergence and evolution of audit market regulation and the external quality assurance mechanism of accounting firms by combining public goods theory,deregulation theory,industrial organization theory,reputation theory,and bilateral matching theory.We also use Porter’s five forces model to explore the possible changes in audit market behavior and structure due to institutional changes from the perspectives of existing competitors,potential competitors,audit service products,demanders of audit services and other stakeholders,using reputation theory and bilateral matching theory.Again,we analyze the audit market structure after the implementation of the new Securities Law from three aspects:changes in audit market concentration,changes in accounting firms’ industry expertise,and changes in accounting firm-client matching relationship,to depict the real structural changes in the audit market under the policy change;second,we investigate the demand side and the supply side of the audit market respectively.For listed companies on the demand side,we adopt a questionnaire to ask them about their reasons for choosing accounting firms and their views on the newly filed accounting firms.Finally,based on the theoretical analysis and field survey results,we propose corresponding countermeasures from the perspective of accounting firms and regulators.This paper draws the following research conclusions and recommendations:(1)The new Securities Law has impacted the audit market structure.From the perspective of audit market concentration,the overall industry concentration and Herfindahl index are decreasing,but the concentration of accounting firms at the front end of the industry is increasing.(2)The new Securities Law has an impact on the factors that listed companies consider in selecting and hiring accounting firms.The new Securities Law has an impact on the selection of accounting firms by listed companies,which are more inclined to consider the reputation,professional competence and quality control system of accounting firms rather than economic considerations,and more reputable and branded accounting firms.(3)The new Securities Law has had an impact on the audit behavior of accounting firms.Large accounting firms have continued to improve their quality management systems,increased investment in information technology audit software,strengthened training for audit staff,and established a system of equal authority and responsibility for audit accountability.For new CPA firms of record,some seek breakthroughs and actively seek audit projects for annual reports of listed companies,while others are rooted in auditing state-owned enterprises,issuing bonds,and government purchase of business.(4)In order for accounting firms to better adapt to the changes in the audit market brought about by the new Securities Law,this paper suggests that the competent authorities do a good job of strategic guidance and moderate supervision,improve technical rules and relevant legal systems;it also suggests that accounting firms strengthen the construction of quality management systems,enhance the training of complex talents,and solidify the foundation of information technology software and hardware.The contributions of this paper are reflected in(1)enriching the research on the change of audit market behavior after the implementation of the new Securities Law.The existing literature has relatively little research on the audit market structure.The literature tends to explore the impact only from one side of the audit market,nor does it conduct in-depth field research.This paper proposes to derive the changes in audit market structure under the influence of the new Securities Law through descriptive statistics.Through questionnaires and field research,we explore the changes in audit behavior of accounting firms and listed companies in the audit market,enriching the research on the changes in audit market behavior after the implementation of the new Securities Law.(2)The research results of this paper have implications for accounting firms to adapt to the new dynamics of the changing audit market and to improve their own industry status as well as their existing competitiveness.Finally,this paper can enable the regulatory authorities to understand the current practice confusion of accounting firms and take targeted regulatory measures.