Party Organization Embedding And Audit Quality

In the new chapter of reform and opening up,Xi Jinping proposed the new goal of high-quality development of China’s economy,and pointed out that audit is an important component of the Party and state supervision system.It is necessary to fully perform the supervision responsibilities of audit,promote anti-corruption and promote integrity,which puts forward higher requirements for the supervision of the capital market and the improvement of the quality of independent audit.At the same time,the construction of Party organizations leading grassroots social governance is an important measure of national governance in the new era.In recent years,with the continuous advancement of the modern enterprise system,party organizations have gradually been embedded in the corporate governance structure,playing an important role,inevitably affecting the quality of audit.This article uses the perspective of party organization embeddedness as a research perspective,taking non-financial listed companies in China’s Shanghai and Shenzhen Stock Exchanges from 2011 to 2020 as the object,and adopts empirical methods to test whether party organization embeddedness in corporate governance can improve audit quality,the intermediary effect of corporate irregularities,and the regulatory effect of management capabilities and internal control.The following conclusions are drawn:(1)The Party organization embedded in corporate governance can significantly improve the audit quality,affirming the positive role of the Party organization in corporate governance;(2)Enterprise’s violations play an intermediary role in the relationship between the party organization’s embedding in corporate governance to improve audit quality,that is,the party organization’s embedding in corporate governance is to achieve the purpose of improving audit quality by restraining enterprise’s violations;(3)The ability of management plays a positive regulatory role in the relationship between the party organization embedded in corporate governance and the improvement of audit quality,which is shown in that the ability of management can strengthen the positive relationship between the party organization embedded in corporate governance and audit quality;(4)Internal control plays a reverse regulatory role in the relationship between the party organization embedded in corporate governance and the improvement of audit quality,which is manifested in that internal control can weaken the positive relationship between the party organization embedded in corporate governance and audit quality.(5)The role of party organization embedding in corporate governance in state-owned enterprises in improving audit quality is more significant than that in private enterprises.The reason may be that party organization embedding in state-owned enterprises is more common,deeper and earlier;(6)For enterprises that choose non-"Big Four" accounting firms for audit,the role of party organization embedding in corporate governance in improving audit quality is more significant than that of enterprises that choose "Big Four" accounting firms for audit.This may be because the auditors of "Big Four" have more experience,stronger practicing ability,larger size of accounting firms,and the role of party organization embedding in improving audit quality is less obvious.(7)Among the enterprises receiving the inquiry letter from the exchange,the party organization embedded in corporate governance plays a more significant role in improving the audit quality.The research conclusion of this paper is still reliable after using the instrumental variable method to eliminate endogenous,after the lag of the embedded independent variable of the party organization,and after replacing the audit quality measurement.The research in this article enriches the relevant literature on party organization embeddedness and audit quality,while exploring audit quality from the perspective of party organization embeddedness,providing inspiration for improving the corporate governance system with Chinese characteristics and the construction of grassroots party organizations,accelerating the party construction of listed companies,promoting the organic integration of party organizations and corporate governance,and providing theoretical support and evidence for implementing various party policies and guidelines.At the same time,it also seeks a new way to further improve the audit quality by embedding party organizations to improve the corporate governance system,thereby improving the audit quality.