An Empirical Study On The Correlation Between Business Diversification Of Public Accounting Firms And Audit Independence

Independence is the key to the moral of the certified public accountant (CPA) owing to its close relationship to survival of the CPA business. With taking diversification strategy and expanding the non-audit services (NAS), many foreign CPA firms have grown up quickly. With the development of NAS steadily, the argument that NAS may weaken audit independence has been heated gradually. More and more people think that CPA shouldn't provide audit and NAS at the same time. Whether the provision of NAS could impair audit independence of our country in the present stage, is worthy of studying.The first part is about introduction. Based on relevant researches and characteristics of our Chinese CPA firms, the paper develops the hypothesis: in the present stage, the business diversification of Chinese CPA firms does not correlate audit independence.The core of this thesis is to make an empirical study on the relationship between diversification and audit independence of our security market. The paper chooses the A-share companies which are engaged in petroleum chemical plastics industry listed in Shanghai Stock Exchange and their CPA firms. The paper uses the tapes of audit opinions to describe the audit independence; revenue percentage in NAS is used to describe the diversification of CPA firms. With Logistic regression modal, the paper conducts hypothesis tests and has not found the correlation between business diversification of CPA firms and audit independence.The last chapter explains the conclusions and provides some suggestions on how to develop NAS for CPA firms of our country.