The Determinants Of The Modified Opinion: An Empirical Study

In the market lack of honesty and credibility, the audit opinion has been a hot topic during academy and entrepreneur. Is CPA hold their independence? Which factors have effect on the sort of audit opinion? The general idea of this paper is to research these questions empirically.On base of the principal-agent theory,information asymmetry and agency cost theory, combining the research method and conclusion of former literature and the special research background in China, this paper develop our hypotheses and research the determinants of the modified opinion from three aspects that are audit supplier,audit demander and audit custody.Firstly, this paper analyze if that codes and acts have effects on the audit opinion in accordance with the distribution of audit opinion sorts during those 4 years. Then, logistic regression is employed to empirically research a sample comprised of 1270 publicly held companies. The results are summarized below: the fee dependence of the accounting firm are significantly influencing the number of modified opinion. According to the variables about the accounting firm, the variables capturing the size of audit,audit tenure and auditor in the different region are significantly influencing the modified opinion. But the organization form of audit firm has not this result. Regression consequence demonstrates that the variables about corporate governance almost have not significantly influencing audit opinion. Confronting two kind of earning management of publicly held companies, the attitude of CPA is different. They will control the audit opinion based on audit risk. As other research conclusion, this paper finds that the characters of companies are very important factors in the determinants of modified opinion.