The Impact Of Stock Exchange's Enquiry Letters On Audit Quality

It can be seen that strengthening the frontline supervision function of the stock exchange is an important direction for the evolution of China's capital market supervision pattern.At present,the stock exchanges conduct supervision on the abnormal behavior of listed companies.If there may be illegal violation of laws and regulations,the stock exchange will immediately send a enquiry letter,and the letter will urge the listed company to fulfill its obligations related to information disclosure as soon as possible.In 2014,China's Shanghai and Shenzhen Stock Exchanges successively disclosed their enquiry letters to listed companies,including regular report enquiries,mergers and acquisitions,and letters of concern,focusing on mergers and acquisitions,foreign investment,and regulation of listed companies.In the case of operations and changes in equity,the listed company is required to explain,correct or supplement the matters of concern in the comment letter,and on this basis,further strengthen the supervision of intermediary institutions such as accounting firms.Under the current regulatory mechanism of the stock exchange,the accounting firm not only needs to respond to the ordinary financial comment data,mergers and acquisitions,etc.,but also the supervisory layer will issue concern letters to the accounting firms in advance to remind them to pay attention to it.The quality of the audit work of the annual report,and even the misconduct of the accounting firm in the previous practice process,directly issued a supervision letter to the individual signature accountants.Under the situation of strong supervision and high self-discipline,accounting firms need to improve their professional prudence and implement more effective audit procedures to improve audit quality and meet increasingly stringent regulatory requirements.The annual report enquiry letters from the Shanghai and Shenzhen Stock Exchanges cover more information disclosures of listed companies and accounting firms.This paper statistically analyzes the characteristics of the annual report enquiries and the company's reply letter published on the main board market of the Shenzhen Stock Exchange from 2015 to 2018.As a sample,combined with the many shortcomings of China's audit quality,the paper studies the various impacts of annual report supervision on the audit quality of accounting firms.The study found that annual report enquiry letters function sent by China's stock exchanges generally showed an increasing trend,and the annual report restatement was more and more frequent,and the probability of being inquired by the four major international accounting firms was far less than that of our domestic accounting firms.The audit fees of the inquired accounting firms are higher than the market average,and the cost growth rate is increasing year by year.In this article,Baker Tilly cannot express opinions on the financial statements of Sky Dragon Ink in 2017.After the inquiry of the Shenzhen Stock Exchange annual report,Baker Tilly has re-established the audit work plan and added more extensive and effective audit procedures.After eliminating the original unrecognizable opinion and issuing a new audit report with standard unqualified opinions,this paper analyzes the shortcomings of Baker Tilly in the first audit work and compares the two audit work.The quality change proves that the annual report enquiry letter will have a positive impact on the audit work quality of the accounting firm.Therefore,under the increasingly strict supervision trend,the purely unrecognizable audit report can no longer become an exemption for accounting firms.Accounting firms need to verify the authenticity of listed companies,the impairment of goodwill,mergers and acquisitions,and related parties.More high-risk issues such as trading require more attention.In the end,the conclusions of this study show that under the strict supervision of the stock exchange,the accounting firm will be more diligent and treat the signing responsibility with caution,thereby improving the audit quality of the firm and protecting the legitimate rights and interests of investors.