Study On The Correlation Between Listing Corporation Earnings Management And Non-standard Audit Opinion

With the rapid development of market economy, every kind of companies risesuch as bamboo shoots after a spring rains, but in the development process of thecompany, due to at present market regulation and company`s internal governance arenot standardized, so many companies conduct earnings management in orderto whitewash statements, so as to attract investment and other purposes, butthese earnings management behaviors will eventually damage the medium and smallinvestors’ interest. So when the State encourages enterprises to strengthen internalcontrol construction, improve the statements of transparency, corporate`s earningsmanagement problems once again attract the attention of the public.There arethe fundamental reasons for the company’s earnings management behavior: suchas investors and managers`targeting interests is inconsistent, or by virtue of theirinformation advantage, the management for its own benefit maximum, choosebehaviors with the adverse to investors, resulting in some illegal earningsmanagement behavior. Based on this, the effective development of the company’sexternal governance mechanisms, the supervision and inspection of the third party isvery important, and the CPA with the title of "economic police" is the important onelink in the external governance, through publishing reasonable audit opinions, there isan important effect on revealling earnings management behavior of the listingCorporation. However, our country faces the reality of earningsmanagement generally prevails in listing Corporations, while finding that CPA auditopinions issued for the listing Corporation published in recent three years, theprobability of a non-standard audit opinions are at about5%, and it does not match thesituation about China’s listing Corporation wide spreading earnings management, sothe CPA can comply with the regulatory authorities`rules andregulations for more earnings management activities of company financial report issues by a non-standard audit opinion,to form the effective externalsupervision? Correlation between the behavior of earnings management anddifferent non-standard audit opinions published by the audit, the above two groupsof problems is the main aspect of this paper.Based on the above two problems, through collecting, analysing of2010-2012years in Shanghai and Shenzhen continuous listed companies`data asresearch samples, according to the audit opinion classify the sample. first, dividinginto standard samples and non-standard sample, it will describe and analyse earningsmanagement of the standard audit opinion`samples and the non-standard auditopinions`samples.secondly, the non-standard audit opinions were divided into non-Standard1（non-unqualified opinion） and non-standard2（strengtheningthe unqualified adjusting paragraph）, it will describe and analyse the non-Standard1and non-standard2sample of earnings management. Through theresearch, confirming the hypothesis and getting three conclusions: first, there is apositive correlation between earnings management and the non-standard auditopinion; second, earnings management and strengthening the regulating matterswithout reservations are positively correlated; thirdly, earnings management andnon-unqualified opinion independent. In this paper, from the perspective of externalauditing, comprehensive reflection of external auditing on earningsmanagement supervision, non-standard audit opinion are subdivided, in-depth studyof its revealing the effect on earnings management behavior; from theguiding external audit practice, remind the CPA concerned audited earningsmanagement behavior, and then issued reasonable audit opinions, control of auditrisk and improve audit quality, play outside corporate governance supervision validityand rationality, and to protect the interests of investors role.