The Impact Of Accounting Firms Interlock With Stock Assurance System On IPO Auditing Market Competition

“Check and Approve System” was effective on March16,2001in China stockissuance.The committee of issuance reserves part right to some Intermediate agencywho is more professional in some field; this reduces Intervention fromadministrative power of government and also declines the possibilities that thecompanies who want to go public bribes the government officials; The committee ofissuance plays an important role in company who can go public, this right createanother possibility that employee from accounting firm who serves as t thecommittee of issuance members cooperate with IPO enterprise to get abnormal rentand higher shares of IPO auditing market. Some accounting firms have a dual rolewho serve as members of China Securities Regulatory Commission’s IssuanceExamination Committee (IEC) and the agency hired by IPO applicant. Thisphenomenon that the agency has dual identifies brings about debates on thefollowing questions which are also the focus questions of this thesis studying on.Question one: Do the IPO applicants who hire accounting firms related with ICEpass the ICE more easily as the accounting firms have employees in the ICE?Questions two: Do accounting firms related with ICE have an advantage in IPOauditing competition market as they have employee in ICE and this result that theserelated accounting firms have a bigger share of IPO auditing market? If so, we needto analyze what causes these big shares of IPO auditing market and is this fair gamefor all accounting firms?This thesis chooses Accounting firms as the research object as accountants fromaccounting firm account for a majority in ICE. Such as in the main board ninemembers come from accounting members against the total fifteen agency membersand it accounts for sixty percentages. And this percentage is higher in GrowthEnterprises Market.We can get conclusions as the following show. First, hiring the agency relatedwith ICE does not have high possibility of passing ICE. This also indicates thatagency having relationship with ICE does not caused unfair competition in IPOauditing market. Second, empirical research on correlation between accounting firmsrelated with ICE and IPO auditing market competition shows that there is no significant correlation between accounting firms whose stuffs are during service asICE members and IPO auditing market competition. But auditing market shares havea significant correlation with the number people who once served as members of ICE.That is to say account firms have a higher market share if they once had more peopleworked as members of ICE. We can also get the conclusions that accounting firmsimpact on IPO auditing market competition mainly by Information spillover effectrather than rent-seeking effect. Simultaneously, based on the above conclusions, weurge for a more transparent stock Approving process, establishment of an effectivedisciplinary mechanism, improve issuing system.