Study On The Impact Of Fair Value Measurements On Audit Quality

With the promulgation of new accounting and auditing standards, fair value beganto be widely used in China’s accounting practice. But due to the characteristics of fairvalue, the asymmetry between accounting principles and auditing standards, and theauditors’ lack of practice experience on it, there are many problems in fair valueauditing, and ultimately affect the quality of financial statements. Through theresearch on fair value auditing, this papaer want to find our country’s specificproblems in this area and related solutions to these qusstions, which is beneficial tostandard setters, listed companies, auditors, investors an so on. It is also helpful toimprove the quality of financial statements that will make it more informative, what’smore, it can promote the development of fair value and the perfection of relatedstandards.The main objective of this paper is to study the influence of the extent of fairvalue’s application on audit quality. In the study, the sample was divided intofinancial industry and non-financial industry, and was performed comparativeanalysis. By screening the A-shares’ data in Shenzhen and Shanghai from2008to2012, establishing an empirical model, using SPSS19.0to make correlation analysisand multiple regression analysis for the two industries, the article draw the mostimportant conclusion: In the financial industry, fair value measurements have nosignificant impact on audit quality, in the non-financial industry, fair valuemeasurements will increase abnormal accrued woking capital. In the multipleregression analysis, this paper also demonstrated that, in the non-financial industry,the negative impact of the fair value on audit quality has alleviated trend over theyears; but in the financial industry, there is no clear trend. In the non-financial sector,with the improvement of main business revenue growth rate, it will significantlyreducethe audit quality, on the other hand, the net cash flow from operating activitieshas the opposite effect on audit quality. In contrast, in the financial sector, thefinancial indicator of the main business revenue growth rate has no significant effecton audit quality, but the net cash flow from operating activities is significantly negatively related to audit quality. Whether in financial or non-financial industries,accounting firms’ industry expertise and ROE will not have a significant impact onaudit quality, and the firm size are significantly positively correlated with auditquality.Then based on these findings, the article gives reasonable explanations, and make acomparative analysis between the two industries. Finally, on the basis of theseconclusions, we put forward a number of policy and recommendations to improve theaudit quality of the fair value measurements, such as improving the accounting firms’industry expertise, and focusing on some key financial indicators during auditing.