Research On The Impact Of The Announcement Of Violations Of Listed Companies On The Auditor's Behavior In China

In recent years, it is not uncommon to see the illegal operation of the listed companies during the developing of Chinese capital market. The China Securities Regulatory Commission, Shanghai Stock Exchange and Shenzhen Stock Exchange(hereinafter referred to as “one commission two exchanges”) also carried out punishment regarding illegal operation. The illegal behaviors cause serious widely damage to the economic interests of the investors. These behaviors not only disrupt the normal operation of the capital market, but also hinder the healthy development of the socialist harmonious society. Therefore, the violations of listed companies have been the concerns of the society.The current researches mainly focus on the causes of punishments and the impact of penalty announcements on the stock market and the managers of listed companies. There still lacks of studies regarding the influence of violations penalties of listed companies on auditor's behavior. This paper focuses on the impact of penalty announcement regarding violations of listed companies on auditor's behavior. The focus of this paper is to study the auditors' degree of reaction to the violation penalty announcement of listed companies as well as their following choice of auditing behavior. Their auditing behaviors are measured by their audit opinions and audit fees.The data of this research is of A-share market, from the listed companies that had been punished by “one commission two exchanges” during 2010-2014. Results are described as follows: If the listed companies in China have the illegal behaviors, it is more likely for the auditor to issue a non-standard audit opinion, and the possibility to charge higher audit fee will be higher. The more severe punishments by “one commission two exchanges” for violations of listed companies, the more probable for the auditor to issue a non-standard audit opinion. The extent of punishments for the listed companies has a positive correlation with auditing fee, but the influence between them is not significant.This study intends to excite attention of listed companies and relevant supervision departments. The supervision departments need to increase the level of supervision and punishment, to strengthen the disclosure of punishment information regarding violations of listed companies, thereby reducing the occurrence of illegal behaviors. Auditors must enhance their risk prevention awareness and strive to improve their auditing negotiation skills. They should charge reasonable audit fees to ensure the high quality of auditing services. Only in these ways can the security market and audit market operating in a healthy and orderly manner and promote the healthy and orderly operation of China's capital market.