The Effects Of The Accounting Firm Transferring To Special General Partnership On Audit Market Performance

Accounting firms are the important intermediary of the development of Chinese capital market and their organizational form is an important system factor which decides the legal liability of Accounting firms and their partners. The experiment of special general partnership began in2008and Accounting firms began to reform their organizational form intensively from2010.40Accounting firms qualified for securities didn't finish adopting special general partnership until December31,2013. The innovation of this organizational form called special general partnership will have an important impact on Chinese audit market performance.Considering Chinese system background and on the basis of current related research results, this paper analyzes the influence of Accounting firms'organizational form changing into special general partnership on the audit market performance, according to New Institutional Economics theory, Principal-Agent theory, Incomplete Contract theory, and Audit Demand theory. What's more, this dissertation puts forward the method of measuring audit market performance by establishing the model to quantify it, in the respects about audit quality, audit fee and IPO underpricing.Firstly, this paper tries to examine whether Accounting firms'transition to special general partnership can significantly influence audit quality in two aspects about accounting conservatism and audit opinion by using annual reports and audit data from2000to2012since Accounting firms'began to reform their organizational form. The research finds that the audit quality of Accounting firms which changed their organizational form from Limited Liability Company to special general partnership has improved a lot. Meanwhile, the audit quality of Accounting firms adopting special general partnership is better than those who remain as general partnership.Secondly, we make an empirical study on the audit fee of special general partnership Accounting firms based on the sample of Chinese listed companies from2008when the trial operation began to the following3years when concentration of reforming continued. The research shows that the audit fee has significantly increased after Accounting firms'organizational form converting into special general partnership while there is no distinct difference in audit fee between that year when concentration of reforming began and the following two years.Then, we use data based on the sample of Chinese IPO listed companies to do empirical study in corporate IPO underpricing which are audited by special general partnership Accounting firms before going public. The results demonstrate that listed companies'IPO underpricing which are audited by special general partnership Accounting firms is less than those who not. Due to High-risk companies'inherent risk, the investors in public distrust them, but when they are audited by special general partnership Accounting firms, the investors' trust in special general partnership Accounting firms offsets their distrust in High-risk listed companies. In the end, the investors would chase after this kind of listed companies, making these companies' IPO underpricing higher. Special general partnership Accounting firms can clear up the public's doubts about IPO listed enterprises' authenticity of accounting information, while the doubts about issue risk because of issuing scale can't be eliminated.Combined with theoretical and empirical research results, we conclude that Accounting firms'organizational form changing into special general partnership improves the quality of independent auditing, increases audit fee, removes the public's doubts about listed enterprises'authenticity of accounting information, raises the efficiency of listed companies'resource distribution and enhances the whole audit market performance.