The Study On The Relationship Between Auditor Size And Audit Quality

In order to accelerate the development of the CPA industry,the Chinese Institude ofCertified Public Accountants issued the Proposals on Promoting Accounting Firms to beBigger and Stronger On May26th,2007and the Political Measures on SupportingAccounting Firms to be Bigger and Stronger furtherly On June8th,2012to encourageaccounting firms to be bigger and stronger.In the promotion of these files,differentaccounting firms merge together,which makes the scale of the firm expandrapidly.However,in recent years,audit failures have appeared very often,which are mostlyrelated to big firms.So the public begin to question the audit quality.In this view,the studyon the relationship between auditor size and audit quality has very important theoreticaland practical significance. This article mainly adopts three methods to discuss therelationship,named inductive analysis method, comparative analysis method and statisticalanalysis method.Firstly,the article summarized the results according to the review of related literatureat home and abroad.Based on the theoretical analysis,we talked about the theory ofeconomy of scale and the principal-agent theory. Because of the theory of economy ofscale, auditor size presents positive relation with audit quality.But agency cost weaken therelation.On the whole,the positive relation still exists.And we verified the positivecorrelation through examples.Secondly,based on the analysis of macro environment,industry environment andcharacteristics,we think that to be bigger is the inevitable choice of the development ofaccounting firms in our country.In this way,the gap between accounting firms in ourcountry and international firms will narrow.By means of problems which discoved byCSRC,Ministry of Finance and the Chinese Institude of Certified Public Accountants,wefind that different kinds of acccounting firms exist low audit quality. Lastly,based on the problems and the reason that different kinds of acccounting firmsexists low audit quality,we put forward the suggestions of balancing the relationship.Wehope to play the positive relationship though the joint efforts of firms and regulators.In thisway,accounting firms in our country will become much bigger and stronger.