Study On The Enterprise’s Demand For External Audit From The Perspective Of Contract Theory

The audit is due to the generation and the development of the contract. In Western countries,audit generated due to the need for the implementation of the contract between shareholders and managersunder the separation of ownership, it’s the internal demands of the corporate participants, rather thanrelying on government-mandated regulations to promote. Independent audit serve the economy and thecommunity with its unique features, it’s the product of social and economic development to a certain stage.China’s independent audit industry develop not long, it’s still in the immature stage of the buyer’s marketstage, the market demand influent and even decide the supply of market, therefore, the research on thedemand side from the audit market, researching the audit demands of the enterprise has an importantsignificance.The enterprise is the nexus of contracts. Audit demands in the form of preferences inheterogeneous auditors, in essence, are the game outcome of corporate contracting parties. Prevalence oflisted companies in China due to the dominance of the problem, the largest shareholder and manager holdthe right to the conclusion of the audit contract actually, they became the agent demander of the companyaudit, establishing the so-called large shareholders and managers audit demands, but they does not have thehigh-quality demand internally. As the final demanders, external shareholders and creditors really have themotivation and ability to purchase audit services, to create high-quality audit demand, but they are difficultto compete with the agent demanders and express their own audit demands effectively. At the same time,government regulators as the biggest real users of audit services for the target to safeguard the publicinterest, also requires companies to provide high-quality audit. Based on this, this article will study that theexternal shareholders, creditors and government regulators how to express their own demands impartiallyand timely through the contract delivery mechanism, namely, studying how to induce the agent needs toproduce the demand for high-quality, in order to effectively guide the enterprise demand for high-qualityaudits.The thesis is divided into seven Chapters: the first Chapter is the preface, first introduces theresearch background and significance, and then reviews the relevant literature. The second Chapter overviews the related theory of contract and audit demands, and builds a model of corporate audit demandsdecision, proposing the idea that contract as the link between various stakeholders can act as a mechanismfor final demanders to express their high-quality audit demands. Followed by the Chapter III, Chapter IVand Chapter V analyze the external shareholders, creditors and government regulators how to inducecorporate demand for high-quality audits through equity contract, debt contract and political contractrespectively. External shareholders and creditors through private punishment mechanism and legalmechanisms to procure the agent demanders to perform the contract and then demands for high-qualityaudit initiatively; government regulators through the compulsory administrative implementationmechanisms to produce corporate demand for high-quality audit. However, the contract transmissionmechanism inducing enterprises to generate demand for high-quality audit require some level of systemand market mechanism to be guaranteed. Next, the chapter VI analyses the obstacles that impede contractto convey high-quality audit demands in reality. Finally, Chapter VII gives the optimal path of guidingenterprises to demand for high-quality audits, proposed to promote the development of the market, improvethe degree of market is the fundamental way to guide corporate demand for high-quality audits, in additionto strengthening the independence of government regulators and improve the legal environment are also theimportant way to guide enterprises producing high-quality audit demands.