The Influence Of Transformation To Limited Liability Partnership Policy On Audit Report Lags

Organization form of accounting firms will directly affect the legal responsibilities of CPA,which will have a series of influence on the practice of CPA.On July 21,2010,the Ministry of Finance(MOF)and the State Administration for Industry and Commerce(SAIC)jointly issued the 2010(12)policy,encouraging large and medium-sized accounting firms to convert to limited liability partnership(LLP)before December 31,2011.Under a LLP,a partner or a number of partners should bear unlimited liability or unlimited joint liability for company debt caused by their own practice,while other partners bear the liabilities limited to their shares in the firm's property.Compared with the limited liability company,the LLP not only improves the legal liability of the CPA,but also emphasizes the causal relationship between responsibility and behavior.Unlike the existing researches focusing on the impact of the audit quality and audit fees,with a sample of 2008-2011 Chinese A-share listed companies,this paper studies the effect of special general partnership on the lag of audit report and examines the different effects between different accounting firms,companies with different ownership properties,and audit clients in different legal environments.The conclusions are as follows:(1)With other factors remain unchanged,the audit report lags increased significantly after the implementation of the transformation policy.(2)This effect exists in non-international-Big-Four firms rather than international-Big-Four accounting firms.(3)Additional tests show that the effect of the transformation policy on audit report lags is more significant in private enterprises.(4)Considering the different legal environment,it is found that the report lag is more obvious in areas with weaker legal investor protection.Our study enriches the literature on the relationship between the transformation of accounting firms' organizational forms and auditor behaviors and provides evidence to the implementation of related policies and further research.