Research On The Size Of Accounting Firms, The Importance Of Auditing Clients And The Quality Of Audit Between The Relationship

One of the key factors to ensure financial report's quality and to improve the investors' confidence of is audit quality, which can also decrease managers' motivation to manipulate the reports. Listed companies, auditors and watch dogs are responsible for the low audit quality. However, many studies indicate that the size of accounting firms and auditors' dependency contribute much to audit quality.Generally speaking, bigger accounting firms depend less on customers. With good reputation and abundant experience, they provide better audit service. But scandals of some big accounting firms such as Anderson and Zhong Tian Qin do not support this point of view. Domestic and overseas scholars have already studied and tried to prove the relationship. However, due to the different study periods, scales and methods, the conclusions are not the same.People have two opposite opinions about auditors' dependency. Some believe that, in order to remain the customers, auditors try to retreat and compromise. Others insist that, because of the restrict legal environment, economic dependency does not harm auditors' independence. Furthermore, auditors are more likely to improve their own audit ability, to meet the requirement of finding mistakes.Considering the conflict between theory and reality, the thesis tries to analyze and find out what influences can be made to audit quality by the size of accounting firms and economic dependency, using detailed data of domestic capital market,.On the basis of all literatures and researches, the thesis begins from audit qulity, then through theory analysis, comes to the study hypothesis. The audit opinion is used as a measurement of audit quality, the annual income is used as a measurement of accounting firms' sizes, and the income proportion of an individual listed company is used as a measurement of dependency. Controlling the influence of net cash flow, credit level and share structure, the model is made to find out the influence of auditor scale and dependency to audit quality. The thesis uses SPSS as calculate tool and focuses on 977 listed companies in 2006 domestic capital market. The research concludes that the size of accounting firms has little influence to audit quality, and the dependency has different effect under different accounting firm sizes.According to the conclusion and domestic capital market, the thesis gives some relevant policy suggestions.