Do Accounting Firms Improve Audit Quality After Mergering?

Since the end of20th century,our accounting firms has accurred large waves ofconsolidation under the executive-leading of our government. Our CPA firms choose tomerge mostly for the emergency measures to meet the needs of government policies, not tomeet the needs of enterprise-scale business expansion which will lead to a natural action.Many studies have proved in recent years that the effectiveness of the first merger and thesecond time merger is not satisfactory.Warning taken from the overturned cart infront,whether the third wave of the merger which is flaring carrying on make the diffrerentresources in the pre-merger integration togather effectively, in order to achieve "stronger"based on the "bigger" enhance the quality of the accounting firm’s audit, thus reallyestablish the quality of the local firm brand, is related to the success or failure of the thirdwave of consolidation, which is particularly concerned.This paper is a theoretical analysis based on empirical research and select therepresentatives of eight mainland H shares audit qualifications as the third wave ofconsolidation and merger in the third wave of consolidation where eight Mainland eventsample for the study, using DA absolute value as audit quality alternative variable. Andmake a descriptive statistical analysis on audit quality before and after the change in accounting firms merge from two perspectives of horizontal comparison and vertical, andselecting Jones model, the cross-sectional modified Jones model and adjust the KS model tocalculate DA and make a strictly paired T test to test these CPA firms which did not changebefore and after the merger of their clients,then establish a multiple linear regressionequation which verify the correlation between the merger events and audit quality. Thepaper make the following conclusion: the merger of the CPA firms significantly affect theaudit quality,the audit quality of combined sample inspection for three consecutive yearswas an inverted U-shaped change which means the audit quality of merging in the currentyear has improved and then dropped significantly the later year, and shows that the mergerof the accounting firm did not achieve the desired results.The main innovation of this paper: Eight large local accounting firms with H-shareaudit qualification are the study sample,the eight local accounting firms occurred large-scalemerger and reorganization driven by the“guidance of accelerating the development of ourCPA industry”,they got the qualifications of auditing H-share companies on December15,2010,this paper has certain degree of innovation with chosing the representative sampleof firms in the third wave consolidation.Meanwhile,in the interval,this paper cut outpre-merger、the current combined and after combined time of the eight accouting firms tomake differences,which would make more accurate conclusions comparing with other papers.