Time Pressure Of CPA,Number Of Clients And Audit Client Portfolio Risk

In recent years,China's large-scale accounting firms were frequently penalized by China Securities Regulatory Commission which brought highly attentions from both the public and the industrial insiders.In fact,12 years ago,Shenyang Warren Accounting firm became the first company in Chinese mainland which received the judgement.One year later,the Supreme Judicial Court(SJC)came out the regulation of accounting firms shall be responsible for tort liability.Therefore,the accounting firms must pay for their mistakes.With the rapid change of the clients' business environment,the risks of operating accounting firms are increased imperceptibly.Facing the risks of litigations,administrative penalty and damaged reputation,how to react adequately and make the best choice for the sake of protecting public benefit,satisfying the audited company and maintaining its own independence which could make the company develop continuously becoming the challenge to be solved.Furthermore,in the aspects of both the certified public accountants themselves and the accounting firms,making the right decisions incessantly also becomes a great challenge without a doubt.Therefore,at the cusp of those issues,they must make the management strategy and the management philosophy more scientific and reasonable,meanwhile,keeping pace with the times.For the accounting firms,in order to ensure the holistic risk is in a lower level,it is necessary to establish an efficient management among clients.This means,not only focusing on managing single client but also introducing the concept of customer portfolio management which conducts better managerial processes by estimating the level of customer portfolio.Based on the above considerations,this paper discusses the practical meaning of how to response and mitigate customer portfolio risks in China's accounting firms.By referencing the theoretical basis such as customer relationship management,reputation mechanism,economies of scale,this paper illustrates the assumptions of the number of clients,the time pressure of the CPAs and customer portfolio of accounting firms.Then it sets the variables and establishes models via empirical analysis which using the samples of simultaneous punishments for both the client and the accounting company from China Securities Regulatory Commission's penalty announcement between 2001 to 2017.Therefore,the conclusions are as follow:(1)The customer portfolio risk of the accounting firm will increase with the incremental time pressure of the CPAs;(2)The customer portfolio risk of the accounting firm will reduce with the increasing number of clients;(3)The customer portfolio risk of the accounting firm will increase with the increase of both the CPAs' time pressure and the number of clients.Finally,based on the results of empirical analysis,this paper illustrates three improving suggestions which are carefully select client portfolios and improving risk management measures.