Research On Correlation Between Accounting Firm Merger And Audit Quality

Audit quality is one of the important marks to measure whether accounting firm is strong, the companies who need audit service always consider the big four international accounting firms who are DTT、KPMG、PWC、Ernst&Young are the representative of high audit quality, and the official is also think so. In order to enter overseas market, or to improve public trust extent to the financial reports, some large and medium-sized enterprises tend to choose the big four who have good reputation and high prestige for audit. The entrance to China of the big four also bring huge impact to local accounting firms. Face to the competition of the big four, the local accounting firms live more and more difficult. In order to support local accounting firms and promote local accounting firms to be stronger, the CICPA and government have been pushing the combination of accounting firms, they wish to expand the accounting firms scale with the way of merge, and make accounting firm much bigger and stronger.Accounting firm merge’s motivation usually has spontaneous motivation and policy driven motivation. The accounting firms which have spontaneous merger motivation are mainly in order to improve the competitiveness or cope with the increase of barriers to entry. The accounting firms which have policy driven motivation are major in response to the call of government and policy, the merge is under the push of the local government and CICPA. At present, in our country accounting firms merger are major the merge of policy driven motivation. By combining we can have the same scale accounting firms compared with the big four, but whether the merge can bring the audit quality improvement is the problem which academia and practice are explored together. This paper is based on the background, adopts normative research and empirical analysis methods, tries to find out whether the merger brings the accounting firm’s audit quality improvement, thus to give some suggestions to the development of our accounting firms.This paper has five chapters altogether. The first chapter is introduction. First the paper illuminates research background and significance, then combs and comments on domestic and international research literature, at last this paper expounds research ideas、research methods、innovation and insufficient. The second chapter is theoretical basis part, at first this part expounds respectively accounting firm merger’s meaning、 types and audit quality’s implication measure targets, and then introduces three basic theories which are corporate reputation theory、scale economy theory and signaling theory. The third chapter is theoretical analysis part, mainly researches the present situation of accounting firm merger、the impact of the accounting firm merge in size, reputation, independence and audit fees bargaining power on the audit quality, specification research concludes that there have positive correlation between accounting firm merger and audit quality.The fourth chapter of this paper is empirical research part, first the author select eight accounting firms merger in2006-2008years as merge cases, and then choose113listed companies which are audited by the eight accounting firms three years before and after merger as research samples, through the descriptive statistics and linear regression methods to explore the relationship between merger and audit quality. The result finds that accounting firm merger has no impact to audit quality, isn’t consistent with the conclusion of theoretical research. In order to prove that the empirical result is reliable, this part does robust test to the regression model, the merge samples are divided into absorbing merge sample and newly established merge sample, and do empirical research respectively to them, the result is same as the overall samples. At last the chapter analyzes four inconsistent reasons. The fifth chapter is research conclusion and suggestions, at first expounds theoretical research and empirical research results, theoretical and empirical research results are inconsistent, and then provides some suggestions to the domestic public accounting firm how to be bigger and stronger, finally puts forward the prospect of research.This paper’s mainly innovation is to extend the year observation, most of previous studies are to research between two years, but if the research year is too short, that will affect the result. This paper collects six years data and does empirical research, increases the reliability of the study. Furthermore, the domestic literature of the correlation between accounting firm merger and audit quality are not so much, and the paper which use empirical study method are relatively rare. This paper uses controls accrued profit instead of audit quality, set up a new regression model, and adds some new variable in the model, that is also rare in the past study.