The Influence Of Social Relations Between Auditors And The Largest Shareholder On Auditing

Social relationship network is the core of modern industrial economy,formed in the interaction between people,people and units,units and units.Under the collusion motivation,the positive and negative interaction will be generated.In corporate governance,the social relationship between the largest shareholders and auditors is an important part of the relationship research,but there are few literature involved.This paper studies the influence of the social relationship between the first shareholder and the auditor on the audit behavior from the perspective of the first largest shareholder of the listed company.The empirical results show that the social relationship between major shareholders and auditors can produce positive cooperative effect.The information support from major shareholders can improve audit efficiency,reduce audit barriers,and improve audit quality;When the difficulty of the auditor’s work decreases,the reduction of audit investment will reduce audit fees.It is found that the listed companies tend to choose the auditors who have social relationship with the major shareholders when they make audit changes,which facilitates the cooperation between them based on social relationship;Therefore,there is no evidence to show that the two sides conspire reversely based on the social relationship,which has little effect on auditor independence;For high-quality enterprises with low degree of hollowing out,the cooperation between major shareholders and auditors based on social relations has a stronger effect on improving audit quality and reducing audit fees.In a word,when there is a social relationship between major shareholders and auditors,there will be cooperation based on information exchange,which has a positive significance to corporate governance.There is no evidence of collusion between them.The innovation of this paper is to explore the role of large shareholders’ social relations on audit behavior,which makes up for the lack of research on large shareholders’ social relations in the existing literature.