Study Of Correlation Between The Outside Director System Of Chinese Public Company And The Independent Audit

The outside director system is the principal constituent for public company's internal management, and the independent audit is the effective means to improve the external management mechanism of public company. A lot of commonness exists between them. A perfect independent audit mechanism is an important prerequisite to guarantee the objectiveness and equity of a certificated public account (CPA)'s audit, and further to exert supervision function of audit and provide high quality audit information. Meanwhile, the guild of CPA should pay attention to independence of itself and provide audit information of high quality, and communicate with independent outside director in time on issues concerning financial audit report and important items in relation with principal director layer in an appropriate way, which is beneficial for an independent outside director to have a thoroughly understanding of public company and further exercise his supervision power effectively. The combination of supervision from a CPA and restriction from an independent outside director will accelerate favorably the operation of a public company. The independent outside director mechanism promotes the independence of the independent audit, and vice versa the independent audit establish an basis for the mechanism of independent outside director.This paper mainly study the correlation between the independent outside director and the independent audit mechanism, by analyzing some typical cases of public companies in China and applying traditional statistics method on 84 public companies in Zhejiang province at Shanghai and Shenzhen stock exchange. Results indicate that: (1) the independent outside director and audit have positive function on the operation efficiency of public company. (2)The independent outside director mechanism has correlation with the independent audit. The higher percentage of the independent outside director in the directorate, the relatively higher benefit a public company achieves, which can be represented as income of each stock, net income rate of estate and total income rate of estate. Accordingly, the company's audit report is more objective.