| According to economic theory of economic man hypothesis, in China under the framework of the current audit system, accounting firms, auditors are also economic man, self, in pursuit of material interests for the purpose of economic activities, the introduction of audit products-Audit reports must be recognized by the market and satisfied by customers, firms can maintain and strive to win more market share in order to survive and develop in this highly competitive market environment.In an open market, there is a natural economic dependence between "sellers" and "buyers", even for the accounting firms which have the oversight function. Accounting firms are "sellers", which must be very seriously to important customers and make every effort to provide customers with "products". However, the audit products customer satisfied by customers are not necessarily high quality audit products, the firm may be in order to meet customer needs at the expense of independence and reduce audit quality, therefore, the economic dependency between the client and the accounting firm may pose a threat to audit quality. As we all know, the firm is not a simple social service agency, known as the "economic police", the audit also has important social oversight functions. If you compromise on key customers led to the reputation of the accounting firm, you will reduce potential future rent, it is a bad idea for the accounting firm. Highly-quality audit service is the long-term development to accounting firms. To compromise to an important customer or to maintain your independence? Auditor faces a dilemma.The economic dependence between the client and the accounting firm also known as the importance of audit clients. In the existing academic research, the influence of the client importance on audit quality is uncertain, there are two main views:oneview, if the Accounting firms'economic dependence on the customer are stronger, they are subject to dismissal or the pressure to reduce audit fees are greater, the probability of compromising to an important customer are greater, earnings management the audited units weaker inhibition, audit quality is lower. This is reflected in the small scale more obviously; Another view is that this economic dependence is stronger, the auditor incurred considerable legal responsibility because of an inappropriate audit opinion issued, in order to control audit risk, the CPA may understand the mode of operation of customers and business processes, improve their professional capabilities, In addition, losses due to the reputation of deterrence, they have stronger sense of risk control to an important customer, and the audit quality are higher, which is reflected in the large-scale accounting firms more prominently. Because once the audit failures, the trust of the investors in the firm's audit quality customer service and financial information will be significantly reduced. The firm has a different reputation. The reputations of the negative impact on auditors are difference in degree. If the firm's reputation is higher, the magnitude of this adjustment is greater. The market mechanism of the automatic punishment is reflected on the high reputation of the accounting firms more significantly.The current increasingly competitive market of auditing, accounting firms compete for customers for the maintenance and resources to take "cheap Showmanship" strategy, to join the price war, even at the expense of the cost of independence and audit quality, not only for the legitimate interests of the investors, this threats more serious harm to the fair market competition and the healthy development of the auditing profession. Therefore, how to control the economic dependency of the negative impact on audit quality, studying how it affects the audit quality of key customers, improve customer firm of important anti-stress ability in terms of operational aspects of theory or practice are of great significance. In addition, as time changes, key customers for the impact of audit quality changes constantly changing because of the external environment and the development of the audit industry itself, therefore, sustained attention to this issue and research is meaningful.However, an important question remains unresolved, and that is how to define an important customer. October 18,2009, the AICPA issued "China Certified Public Accountants Code of Professional Ethics", which explicitly states that "if the accounting firm for two years from one entity belonging to the public interest audit client and its associated entities charged the full cost of Collected from all customers of its full cost accounted for more than 15%, accounting firm shall disclose to the client control layer of the fact that the implementation of projects by other accounting firms quality control review of the adverse effects will be reduced to an acceptable level. "In addition, the Association of Chartered Certified Accountants in the "Certified Public Accountants Code of Ethics" said clearly, from the audit of income point of view, "damage the public understanding of the economic dependence of auditor independence, for listed or public interest is 10% Compared to 15% for other companies. "Thus, in order to better regulatory agencies and practitioners of social audit practice and protect the independence of the audit, to find the appropriate audit revenue contribution rate as an important customer by customer basis, and generally for the practical operation with a reference value.In this paper, Shanghai and Shenzhen A shares for 2008-2009 to provide annual reports of listed companies and accounting firms audit study, empirically testing customer importance impact on audit quality. Controlled manipulation of the absolute value of accruals to measure earnings management on company level, while inhibition of the audited firm's earnings management unit is the embodiment of audit quality, so, this article will control accruals absolute profit value as an alternative audit quality variables. How to define key customers is different in theoretical circles, foreign literature mainly derived from the audited accounts for listed companies of accounting firms all the income year to measure the proportion of total income, domestic and foreign literature also consider this indicator is the customer indicators of a good alternative, but because the audit fee information disclosure system is not perfect, customers accounted for firm asset size of all the year customer numbers and assets on the proportion of the definition of client importance mainly in the domestic research literature. This paper argues that with the recent development of the audit market and securities regulators attention, information disclosure of audit fees has been gradually transparent and standardized, to study the income measure of client importance of the contribution rate is feasible. After controlling for other factors, the empirical analysis of the influence of client importance on the accounting firm audit quality. Whether the economic dependency between the client and the accounting firms is detrimental to audit quality, the empirical results show that:First of all, from all the firms, the customer's economic dependence on auditor independence has had a negative impact, audit quality is reduced. Since the audit market competition and maintain customer pressure are more than the motivation to protect the reputation, in the face of an important client, accounting firms and auditors have to lower the standard, to compromise to customers in order to survive and develop in a certain degree.Secondly, based on firms of different sizes, the impact of important customers on the audit quality may be different. "Big Four" and "non-Big Four" of the audit of listed companies will be divided into different sample groups and tested. Empirical results show that the "big four" accounting firms for the audit of listed companies in the share of income are higher, the controlled manipulation of the absolute value of accruals is lower, the inhibitory effect of the level of earnings management of listed companies is better, the quality of audit is higher. This may because larger firms have a wealth of resources, larger volume of business firms, which reduces stress by customers, they are less likely to reduce audit quality, but for the motivation to the protection of reputation, they are more incentive to maintain high quality audit services. Relatively speaking, the "big four" in the audit market has some monopoly, and its ability to continue to fight for survival and development does not depend on more important customers, but the risk of medical practitioners. While key customers of "big four" are generally not only available for audit of financial statements, but also for tax, consulting and other non-audit business with customers more closely and providing those non-audit services help accounting firms and auditors to understand the audited entity's financial position and risk areas deeply, and to improve audit quality. In the "non-Big Four" sample group, client importance and the level of earnings management is a positive correlation, economic dependence is higher, the earnings management auditor for lower degree of inhibition, the audit quality is lower, but not significantly, probably due to "Non-Big Four" accounting firms face the pressure of market competition, and a greater crisis of survival, forcing its key customers may be a compromise between them and the economic dependence of customer has damaged the independence of the audit, resulting in the lower audit quality. However, the accounting firms in China cooperate and compete with especially the "big four" in the continued expansion, become bigger and stronger, and absorb the advanced management experience the introduction of the concept and risk-control, making this positive correlation is not significant.How to define key customer by the audit revenue contribution? At present, the study conclusions of the relationship of client importance with the audit quality is inconsistent, someone propose that the client importance has a positive correlation with audit quality, others propose that client importance and audit quality is negatively correlated, there is no definite conclusion. This paper argues that there may be another kind of relationship between client importance and audit quality, that is, from the perspective of the audit revenue contribution, there may be a critical value to definite important client, if the audit revenue proportion does not meet the threshold, then the economic dependence between the firm and customers is not sufficient to constitute a threat to audit quality, such customers are general customers; if the proportion meets or exceeds this threshold, this will be a significant threat to the independence, and audit quality is significantly reduced, that should cause the relevant regulatory authorities and the risk control department of accounting firms cautious in dealing with such important customers.This paper focuses on the empirical research part of the critical value of the positioning of key customer issues:First, in the total sample group 2008-2009 study, the higher and lower than the assumed critical value is defined as a dummy variable to dummy variables and the relationship between audit quality and the degree of significance criteria, inspection of existing literature and practice made reference to the adequacy of the critical value, if the dummy variable was significantly associated with audit quality, the impact of key customers and the general customer on the audit firms quality has significant differences, indicating that this threshold is appropriate. The empirical results indicate, the 15% proposed by "Certified Public Accountants Code of Ethics" and the 0.5% proposed in the foreign literature are not suitable for the critical value of the audit market.Then, to find a suitable threshold, this paper test relevant threshold step by step in detail, and ultimately made reference to the critical value and the range of critical value is 3.7%(or 3.8%) and 2% -3.8%, and attempts to discuss with a critical value, the "big four" and "non-Big Four, " whether the balance of economic dependence on the performance and brand reputation are the same. In view of the sample used in this paper, the "Big Four" accounting firms for the audit of listed companies in the maximum income contribution of about 2%, so only 2% of this critical value as a reference test, the results show that the "non-Big Four "important customer group, the audit has significant negative impact on the quality, but the "big four" group was not significant, indicating that 2% is appropriate for "non-Big Four" to define an important customer, and is not fit for the " big four". In view of the audit income average contribution rate of the "big four" is lower than the "non-Big Four", this threshold in "big four" can be inferred less than 2%. This shows that for firms of different sizes, we should use different audit income contribution rate as thresholds for the definition of an important customer, the lower threshold in large-scale firms.The main contribution and innovation in this paper are the following two points:First, the domestic and international literature both think that the revenue from audit clients account for the proportion of total revenue office is the best indicator to test economic dependence, but most of the literature of domestic uses assets proportion of customers as alternative variable to define important client, the most important reason is that the past costs of disclosure of the audit of listed companies is not standardized. This paper argues that with the stock market is becoming more perfect and the auditing profession's own development, the disclosure of audit fee information will be gradually standardized, from 2008 the disclosure of information in the accounting firm form the AICPA not only revealed the total income of firms, it also disclosed the total audit income, which means to separate the audit of income and non-audit income, these have facilitated the further theoretical research. From the information published in the AICPA in 2008 and 2009, the current audit revenue is still a major component of total revenue, accounting for about 80%, given the disclosure of the current non-audited fees information is still not standardized, the paper argues that the revenue will come from the client's audit firm audit accounts for the proportion of total revenue comes from customers of all alternative accounting firm revenue share of total income is significant. The second point is about how to locate the important customers with the critical value of the initial exploration, this is the biggest innovation of the article. This paper argues that, in addition to positive correlation, negative correlation, the client importance and audit quality may have another relationship, that is assuming that there is a critical value, when the client audit revenue contribution to this critical value is low, the economic dependency between firms and customers does not significantly reduce audit quality, if the audit revenue contribution rate of customer meets or exceeds this threshold, then the independence of the audit and economic dependence will have a significant adverse impact, which is the focus of empirical research. First, empirical results show that the 15% proposed by the AICPA in the "Certified Public Accountants Code of Ethics" and the 0.5% proposed in the foreign literature are not suitable critical value of the audit market in our country, and then proposes a stepwise reference test method to find the appropriate range of critical values and critical values. In addition, empirical results suggest that for firms of different sizes, we should use different audit income contribution rate as the threshold to define important customer, the lower threshold in large-scale firms.This article defines the audit income coming from the client's/total revenue of the firm's annual audit (the audit revenue contribution rate) to measure client importance and up to now only in 2008 and 2009, the AICPA reveal total audit revenue information of accounting firms, the sample were inadequate. With future revenue information disclosed in the annual audit fees and non-audit services continue to standardize and improve the information, by collecting more samples of data, we can draw more statistically significant findings. Since some requirements of the research, this article does not consider the audit fees of listed companies abroad and other related costs, if in the future for China's listed companies outside the audit fees and other costs associated with the disclosure of information to be more detailed, clear, relevant sample data can be increased and the statistical results can be improved. In addition, due to lack of existing empirical research on how to define the importance of customers of accounting firms, whether the contribution rate for the audit income has a critical value, how to locate the critical value is not only lack of theoretical analysis and practical experience in the data, but also lack of empirical tests. With further study of empirical analysis methods and the increasing disclosure of relevant information, the theoretical and empirical analysis in this area not only have research value, but also have a higher significance for the practitioners. |
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