Effect Of CPA Tenure On Audit Quality Evidence Based On Firm Merger

In the period of economic transformation, the merge of auditing firms undoubtedly brings“expansion” of firms’ scale. Whether the mergence under policy-driven wave can drive thedevelopment of audit market and enhance audit quality still needs to be tested by the market. Acombination of descriptive statistical analysis and case study has been widely adoption in availableliterature. In order to investigate the economic consequences of auditing firms merger, the literaturechoose audit market, audit fees and auditor reaction as the angle of research. Because of thedifference in the sample selection, model specification and variable definitions, conclusions aboutwhether the merge of auditing firms can promote audit quality is controversial. The merge ofauditing firms can rapidly expand the scale,but enhance audit quality is decided by the qualitycontrol system and the professional services capabilities, etc., Under the condition of the merge ofauditing firms, Whether the continuous term of CPA can improve audit quality is still needs to betested.Based on the theory of corporate reputation, economies of scale, learning curve effects andhuman relations theory, the paper select22cases of auditing firms with securities license on theaudit market in2009.This paper choose empirical data during2007-2012of audit client as theobject of study.The paper make an empirical study on the relationship between accounting firmmerger, signature CPA tenure and audit quality by descriptive analysis and multivariate linearregression analysis. Empirical study found that the merge of auditing firms significantly enhanceaudit quality. The continuous term of CPA extension can enhance audit quality in the combinedfirms.The results of this study show that the accounting firm merger of scale brand culturesignificantly improve audit quality, a long period of CPAtenure can bring higher quality. In order toprovide high quality audit services, accounting firms shall fully consider the successor of the CPA’sprofessional competence and to maintain appropriate long term CPAaudit services.The wave of merger of auditing firms can promote the scale of accounting firm to expandquickly in the short period. Merger is not only a direct expansion of the number of business in theaccounting firms, also expand the scope and variety of its services. On the one hand, firms must beable to adapt to the changes in the scope of business, continuously upgrade the professionalcompetence of staff to meet the requirement of human resources. At the beginning of the period, inresponse to the technical adaptation, contracting and human resource, auditing firms shouldcombination of the different understanding of the business philosophy and corporate culture quickly.On the other hand, at the beginning of the period, the continuous term of CPA，who familiar withcustomer operation, internal environment and the risk of material misstatement, can improve the quality of practitioners in a certain extent and reduce the risk of audit. At the same time, securitiesregulatory authorities should strengthen the supervision of auditing market, standardize the relatedmatters, improve audit quality to satisfy the demand of the financial information.