Public Accounting Firm Merger’s Impact On Audit Quality

Aaccounting firms merger happens frequently, foreign accounting firms in the last300years formed International Big Four as more merger. Chinese firms had4waves of merger in the past20years. Chinese Institute of CPAs(CICPA) proposed consolidation by promulgated documents to promote the firm bigger and stronger; and the national firms merged positively to meet the requirements of legislation and maiket. However, does that the "bigger" firm means the "stronger" firm? We are obliged to testify the results of the merger wave and analyze the mutual relationship of China’s firm merger with audit quality.The article focuses on Ruihua Certified Public Accountants merger event, adopting the method of case study to investigate the impact of accounting firm merger on audit quality. Judging from the report of CICPA released in2013and2014about Firms Rank Schools, Ruihua Certified Public Accountants has been became the third and built it’s brand, in line with the characteristics of the combined tide. The firm had merged many times in every cave, as a result, the Ruihua merger case was taken for a good typical example for this merger cave. By selecting the commonly used alternative audit quality indicators, this paper regard the proportion of non-standard audit opinion as a main measure, using the extent of earnings management and professional quality inspection report as supplementary methods of measurement. The results show that this merger enhanced CPA talents to develop and grow, thus, to obtain more and higher quality customer resources, and achieve more the listed company customers and higher revenue. But as the performance of firm mergers is a dynamic and long-term process, Ruihua’s audit quality was not along with a significantly improvement. Maybe the reasons are inadequate preparation and inexperienced, the firm’s audit quality hadn’t risen notably. However, with the in-depth development of integration, we believe in the Ruihua firm’s audit quality will improve quickly. Through the analysis of Ruihua merger case, some suggestions are put forward to chinese national firms by merging to improve audit quality that the merger can’t be formal but should attaching importance to the preparatory work, integrated work and consolidated work, only by this can eventually achieved the goal of "bigger and stronger", At the same time, the supervision department should make itself to be guider and supervisor.