Research On The Relationship Among Audit, Management Power And Quality Of Financial Report

Financial report reflects the enterprise’s financial conditions and operating results.It’s not only the important foundation which shareholders, creditors and other interested party rely to make investment decisions, but also it’s always the worst-hit areas where financial information be whitewashed or fabricated. Because of the great influence of the quality of financial report, researchers at home and abroad study intensively in this area, set up a variety of measures to explore it from various angles.Management is the actual managers of the listed company, have a major responsibility for financial report’s quality. In this paper, on the basis of summarizing the predecessors’research results, I explore its impact on the quality of financial report from the perspective of management power. Because of the governance mechanism problem--principal-agent phenomenon and the asymmetric information inside and outside of company, management in our country’s listed company who actually responsible for the company’s business can control the generation and disclosure of accounting information.For the aim of gain more profit,management will use their power to adjust imformation which reflected by financial report and will led to the decrease of the financial report’s quality.But external audit services which provided by certified public accountants can restrict the influence to some extent, however, the restriction would probably damaged by management who spend higher audit fees.So in this paper, I detect how management power affect financial report’s quality under audit perspective in empirical approach.In other words,I explore the quality of financial reports of listed companies from two aspects which respectively are internal governance mechanism and exterior supervising system. Sample in this paper are from the date of China’s A-share listed companies from 2009 to 2014.Through empirical study, this paper proved following points:1) the management power has remarkable negative influence on the quality of financial repor;2)The adverse influence on financial report’s quality which bought by management power can be released to some extent when listed company audited by the "big four" accounting firms;(3) If listed company’s prefer to pay higher abnormal audit fees to auditors, the negetive influence for financial report’s quality which derived from abuse of management power will deteriorate.At last,according to research conclusion, this paper try to put forward suggestions for government supervision and management power mechanisms of listed companies.