Studying On Audit Market Structure And Audit Quality

This paper firstly introduces the current situation of China’s auditing market structure,cause of firm to incorporate and problems, while analyzing the concept and influencingfactors for the auditing market structure. Then it analyses and discusses the relationshipbetween the concentration degree of substitution variables, industry expertise, andterritoriality of the auditing market structure and auditing quality, followed by discussion onthe context of the incorporation of firms and the impacts of auditing market structure on theauditing quality. On the basis of theoretical analysis, through structuring the econometricmodel and using incorporated firms in2007-2010as study samples, with the application ofstatistical method, it firstly makes an analysis on the concentration degree of substitutionvariables, territoriality, and industry expertise in the auditing market before and after themerger, and secondly analyzes the effects of the form and scale of incorporation onrangeability of auditing quality and those of the incorporation on the auditing market. Andfinally, it makes a demonstration analysis on the effects of auditing market structure on theauditing quality. The results show that compared to before the incorporation, theconcentration degree in the auditing market has a positive influence on the auditing quality,which indicates that the improvement of concentration degree in auditing market afterincorporation benefits that of auditing quality; the industry expertise also has a positive effecton the auditing quality, indicating that the industry expertise of incorporated firm wouldimprove the auditing quality; and that territoriality in the auditing market has a significantlynegative effect on auditing quality, indicating that the increased audit in the different regionafter incorporation would facilitate the improvement of auditing quality; among firmsinvolved in the corporation, the auditing quality of newly-founded firm of incorporation issignificantly better, with respect to firms of incorporation by absorption. Based on results oftheoretical study and demonstration analysis, this article provides several recommendationson how to improve and perfect the auditing market structure and the auditing quality inChina.