A Research On The Applicability Of Tendering Within The Audit Market

In recent years, as one of auditor's appointment means, audit tendering has emerged in the audit market of china. The developed countries had already put the audit out to tender in the 60's, and with the significant changes of the auditing environment worldwide, the frequency of audit tendering has been increasing since the end of 80's in 20 centuries. However, domestic practitioners, academicians, companies and administrators have very serious disagreement on using tendering in the audit market of china. The controversy focuses on whether it's applicable in China and whether it strengthens or weakens the function and value of independent audit. This thesis focuses on whether audit tendering could play the special function in the auditing service market of China and provides some new evidences and ideas. We adopt normative and positive approach to study this problem and there are six chapters in this thesis: Chapter1: Introduction. This chapter discusses the research background, basic framework and main concepts. Chapter2: General Situation and literature Overview of Audit Tendering. We summarize and reviews the practical application and academic research on audit tendering. Chapter3: Focus-interviews Investigations on Audit Tendering. We select Fujian province as the interview target to know the current circumstance of tendering. Chapter4: Theoretical Research on the Applicability of Audit Tendering. This chapter sets up an analytic model using the rational self-benefit theory of economics to analyze the applicability of tendering within the audit market. Chapter5: Applicability Research on Audit Tendering in China. According to the characteristics of auditing market in China, there are five factors that cause the variation of audit tendering and threatens the cost compensation of audit firms. Chapter6: Preliminary Conclusions and Suggestions. Our conclusion is: The current circumstance is not suitable for audit tendering in China. Audit tendering leads to increases the over-competition on prices in the market. Finally, the paper suggests how to improve audit environment and the principal-agency relationship within audit market. The major research value of this thesis includes: First, it provides a preliminary fundamental for further researches through documentary research. Second, it collects some first-hand information on characteristics of tendering through focus-interviews and reflects the attitude of relevant stakeholders. Third, it probe into the applicability problem of tendering under an analytic economic model, we hope it is useful for improving the understanding of audit tendering.