Study On Correlation Of Independent Audit Quality And Earnings Management Of Listed Companies

CPA for independent audit of listed companies as a kind of important legal governance mechanisms identified through professional means appropriateness of financial data, is among the stakeholders to solve information asymmetry between the stakeholders, reduce contract costs, moral hazard and adverse suppression an important way to choose. With the development of China’s capital market matures, our independent audit market is gradually scale, systematic, more and more extensive concern of government, the public investors. Survival and development of independent audit quality not only directly affect the level of CPA practice is also related to the healthy and orderly development of China’s capital market.At present, China’s listed companies earnings management exists various interests motives, including financial statements whitewash, manipulation, also according to the principle of benefit maximization to take use of accounting policy in accounting standards within the legitimate scope. Widespread earnings management reduces the quality of financial information, increased information asymmetry between the listing Corporation managers and users of financial information, so that investors and other stakeholders on the financial information of the enterprise have wrong judgment, and even lead to mistakes in decision-making, increase the cost of contract. These problems are needed by the independent audit quality to solve. Because of this, the necessity of our independent audit issues related to listing Corporation, the quality of earnings management, considering the particularity of our imperfect market and the existing research, this paper tries to combine our country’s specific market environment and institutional background, make a further analysis on the relationship between China’s independent audit quality of earnings management and listed companies.In this paper, after reviewing the relevant research literature, the concept of independent audit and earnings management is defined, this paper choose generalized concept of earnings management, measuring earnings management through a modified Jones model. On this basis, were launched on an independent audit quality, earnings management and correlation of theoretical analysis in order to make three assumptions. On the part of empirical study, we test the level of correlation between earnings management and Independent audit opinion, also the correlation between nonstandard audit opinion under the specific type of audit opinion and earnings management. After that we consider the effect of different sizes of CPAs. Finally this paper draws the following conclusions: there is a positive correlation of listing Corporation earnings management and independent audit opinion; for the existence of improper earnings management behavior of the listing Corporation, CPA often tend to give unqualified opinion with explanatory notes, balancing customer relationship and audit risk.