Balance The Characteristics Of Shareholders, Conflicts Of Interest And Audit Governance

When the internal governance effect requires improvement, external audit is relatively weak, the substantial shareholders have motivations and abilities to seek for their own benefits by using the advantages brought by its stake and information. Substantial shareholders whitewash even create fictitious fortune statements to cover the holes exist in the statement to avoid the external auditing constraints through involvement of the so-called "tunnel effect". At the same time, the first large shareholder’s emotions on company’s equity, whitewashing even creation of financial statements and other irregularities seriously infringed upon the interests of other balance shareholders(this article refers to the second largest shareholder), so other shareholders plays the roles of supervision and balance more than others.Balance shareholders accomplish supervisions and balances on the substantial shareholders mainly through the company’s internal governance mechanisms and external audit mechanism in two ways.Vast researches on shareholder balancing and external audit manage have been done by domestic and foreign scholars, while most of them mainly focuses on relations between balancing shareholders’ proportions on companies’ capitals and auditing fees and a total conclusion remains undone.Writer thought absence of considering the essences of shareholders is the reason.State-owned balancing shareholders exercise their rights on behalf of the government and thus a multiple proxy links are generated. Shareholders of this essence prefer gaining their own benefits by taking advantage of their positions, which is before series of corruptions on company interests. Due to differences on interests, shareholders of private enterprises have stronger desires to balance other shareholders. Shareholders of different essences will influence audit differently due to different opinions on balancing. It is of great significance to study this process.Based on this, this paper chooses data of Chinese listing private manufacturing industry corporation within 2012-2014 and analyzes effects on external audit governance brought by shareholders of different nature(private and state-owned shareholders)and shareholding ratio. External audit governance mainly come in two ways: non-standard audit opinions issued by the auditors, and auditing fees. Writer hopes to provide new ideas and models for the study of equity balance and audit governance to extend and promote research of this aspect.Through study,this thesis made these conclusions:(1)when balancing shareholder of one company is private, this company will receive an unqualified audit report easier and auditing fees will be higher than compared to state owned company.(2)Possibility of auditors’ will to issue an unqualified audit report will be stronger and auditing fees will decrease as proportion of private shareholders increases. On the basis of conclusions above, this thesis proposes advises on company governing:(1)Encouraging private shareholders by involving balancing shareholders of private.(2) Stronger restrictions on state-owned shareholders.(3)Higher qualities and independence of external audit.(4)Banning on single dominant shareholder.