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Research on the Effect of Audit Quality on Earnings Management in Chinese Listed Companies

Author: ChangCheng
Tutor: ChenXuDong
School: Shihezi University
Course: Accounting
Keywords: Audit Quality Earnings Management Firm size The firm 's industry expertise Firm self- selective
CLC: F224
Type: Master's thesis
Year: 2009
Downloads: 78
Quote: 0
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Abstract


Audit services product is a \Certified public accountant in the course of their practice prudent degree of its independence to play effective constraints listed company earnings management behavior, thereby reducing the commissioned agency costs between owners and managers. Therefore, the study of the impact of audit quality on earnings management behavior has become an important theoretical and practical issues in empirical accounting and auditing areas. Abroad for the study of the relationship between audit quality and earnings management for more than 20 years of history, and has achieved a wide range of research. International scale, specialized business \In contrast, Chinese scholars in recent years has also gradually expand the empirical research not yet mature securities market of China, in an attempt to discover the intrinsic relationship between audit quality and earnings management of listed companies. However, because of the selection of the efficient market system background and research methods and abroad are quite different, based on the relationship between China's securities audit market audit quality and earnings management has not yet formed a unanimous conclusion. In view of this, combined with China's specific institutional background and market environment, further elaborate attempt to make the intrinsic relationship between audit quality and earnings management of listed companies in China. In this paper, based on a review of related research literature, starting from the definition of audit quality recognized at home and abroad, and to analyze the impact of audit quality on earnings management based on two aspects of the audit of demand and supply. First, from the demand point of view to consider the firm self-selection problem by probit (Probit) model of how the demand side in the auditor appointment process applied endogeneity of audit quality, and thus audit quality assumption from the audit point of view of the supply side to demand-oriented The analysis audit quality effective supervision of listed company earnings management behavior. In this paper, the 2002-2007 Shanghai and Shenzhen A-share company the mixed-sectional data as a research object, the main choice of firm size, industry expertise as the audit quality proxy variable to study the relationship between earnings management; steerable the absolute value of profits accrued to measure the level of earnings management of listed companies; using Heckman two-stage analysis method to control the endogeneity of the explanatory variables in the ordinary least squares regression equation, trying to prove that the oversight and inhibition of audit quality on earnings management. There are differences between the audit market environment and audit practicing risk level and the Western countries because of our corporate governance characteristics, as well as taking into account the firm's large-scale, specialized operating policies and measures have been introduced and the implementation of late, the findings of this article to the transaction by size and industry expertise as the representative of audit quality on earnings management exists a time demurrage and observation period. Respectively by the full sample and sub-annual data 2002-2007, we draw showed a significant negative correlation between the proxy variables as audit quality since 2006 after the firm size and industry expertise and earnings management, indicating that as the scale of supervision of audit quality on earnings management and the specialized development strategy launched step by step and in-depth, began the performance significantly. On the other hand, continue to strengthen the effective supervision of the audit market environment and actively guide the premise, the conclusion to support and encourage our accounting firm to become bigger and stronger, nurture industry experts to promote the auditing standards and international convergence as well as norms CPA internal governance development strategy further implementation.

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CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
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