The Level Of Corporate Governance、Real Earnings Management And Audit Opinion

The level of corporate governance and earnings management are factors affecting audit opinion behavior from customers’ level. Earnings management can be divided into accrued earnings management and real earnings management. Compared with accrued earnings management, real earnings management is often more concealed, leading more serious economic consequences to company. In 2007, we implemented new international conventional Accounting Standards for Business Enterprise, so listed companies are more inclined to choose real earnings management, which will not only affect the generation and disclosure of enterprise’s accounting information, but also influence the implementation of audit procedures and audit opinion. So it is significant to study the influence of the level of corporate governance and real earnings management to audit opinion. In this paper, we select listed companies in Shanghai and Shenzhen Stock Exchange from 2007 to 2013 as samples, adopting the methods of normative research and empirical research, with reference to the experience of domestic and foreign scholars, constructing the research model and carrying on multivariate linear regression. Our study shows that the level of corporate governance and real earnings management can significantly affect the type of audit opinion issued by Certified Public Accountants.This paper is divided into six chapters. Chapter 1 is the introduction. Chapter 2 is the literature review of the domestic and foreign scholars about corporate governance and audit opinion, the real earnings management and audit opinion as well as other factors influencing audit opinion. Chapter 3 analyses theoretically the influence of the level of corporate governance and real earnings management to audit opinion based on the synthesis of previous studies, and develops research hypothesis. Chapter 4 builds research model about factors that affect audit opinion, based on the “consequences-agent” framework of audit opinion, starting with customer level’s reason of affecting audit opinion. Chapter 5 is about empirical test and analysis on the impact of corporate governance and real earnings management on audit opinion, conducting descriptive statistical analysis, Pearson correlation analysis, Logistic regression analysis as well as robustness test of variables. Chapter 6 is the conclusion of this paper, indicating the deficiencies and making relevant suggestions.The major conclusions of the paper are as follows:1.Theoretical analysis shows that the level of corporate governance and real earnings management can significantly affect the type of audit opinion based on the “consequences-agent” framework of audit opinion. The higher the level of corporate governance, the more possibly Certified Public Accountants tend to issue standard audit opinion; the higher the degree of real earnings management, the more possibly Certified Public Accountants tend to issue non-standard audit opinion.2.The empirical results indicate the effect of the level of corporate governance and real earnings management on audit opinion:(1)In this paper, we use executive compensation, the diligent degree of the board of directors, the diligent degree of the board of supervisors and concentration of ownership to measure the level of corporate governance. We conclude that the higher the level of corporate governance, the more possibly Certified Public Accountants tend to issue standard audit opinion.(2)The higher the degree of real earnings management, the more possibly Certified Public Accountants tend to issue non-standard audit opinion, which shows that Certified Public Accountants can identify the real earnings management behavior of listed company.