The Analysis Of The Effect Of Accounting Firms Transforming Into Special Genernal Partnership

In2010, ministry of finance issued a regulation on the large and medium-sizedaccounting firm to promote the use of special general partnership firm. The regulationrequires that the top10local accounting firm to complete the transforming to specialgeneral partnership. The regulation also encourage medium-sized accounting firm totransform into special general partnership. The organization of special generalpartnership combined the advantage of the partnership and limited liability, whichrequires partner to take more responsibility.The existing literature about the organization of accounting firm is more aboutlimited liability and lacking of special general partnership. The few research onspecial general partnership is all about its feasibility.There is few research on theeffect of special general partnership.This paper will combine normative research and empirical research in order totest the effect of the policy. Firstly, we will discuss the effect on audit quality based onfirm theory and the effect on Audit fees based on the risk-return theory when the legalliability of partner is changed. Secondly, based on the theoretical analysis, we will usethe top10accounting firm as research object, choosing the listed company on A-stockmarket as sample, establishing audit fees model and audit quality model, to makeempirical analysis on the effect of the policy. The conclusion is that when anaccounting firm transform into special general partnership, the partner need to takemore responsibility so that he will work more cautiously. As a result, the audit qualitywill be improved. Simultaneously, with the legal risk increasing, the accounting firmwill charge more risk premium that cause the audit fees increase.