Study On The Client Loss In The Merging Of The Grant Thornton Accounting Firm

With the continuous development of the capital market,China's local accounting firms have experienced four large-scale waves of merging in the recent 30 years since the 1980 s.In 2010,the Ministry of Finance issued a document requesting large-scale firms to be converted into ordinary partnerships before December of that year.Since then,many firms have gradually expanded their scales through merging.After the Chinese Institute of Certified Public Accountants(CICPA)released the document on further enlargement and strengthening of firms in 2012,firms in China accelerated the pace of merging,which also marked the beginning of the fourth wave of merging.In this wave of merging,many eye-catching accounting firms have emerged.Among them,Tianjianzhengxin accounting firm and Jingdutianhua accounting firm merged into the Grant Thornton Accounting Firm,and this merging was praised by the media as “strong alliance”.Concentrating advantageous resources,optimizing the industry structure and establishing a national brand are the original intentions of the Ministry of Finance and the CICPA to jointly promote the merging of firms.However,it is found by comparing the situation before and after the merging of some large firms that there are a huge loss of clients in the merging of accounting firms,which is inconsistent with the original intention of the firms in merging,and the Grant Thornton is one of them.Then,what has caused the massive loss of clients in the merging? What are the characteristics of client loss? What are the consequences of client loss? These issues deserve our indepth consideration.In particular,in the context of that the Ministry of Finance and the CICPA strongly advocate the firm to become bigger and stronger,the Grant Thornton's loss of clients is selected to carry out case analysis,which is of great practical significance.It can be found by analyzing the quantity of clients,market share of the industry,the scale of clients' assets,audit fees and the audit quality of the Grant Thornton before and after the merging that these factors are not the cause of the Grant Thornton's loss of clients in the merging.Through further analysis of the changes to audits and the loss of clients before and after the merging of the Grant Thornton,characteristics of the regional distribution of the lost clients,the whereabouts of the original branches of the firms,lost clients and some registered accountants with the signature of the lost clients in the merging,it can be found that the whereabouts of lost clients and their signed registered accounts are consistent,resulting in that “although the firms have changed,the accountants remain unchanged”.In addition,this paper further analyzes the differences between these “following clients” and other clients from the perspective of audit fees,audit opinions and audit quality,and the changes before and after.It is found that “following clients” have lower audit fees,more standardized audit opinions and better audit quality than ordinary customers.After the firm was established,the audit opinion obtained by the “following clients” did not change significantly,and both the audit fees and the audit quality increased.Researches suggest that CPAs will “attract clients by low cost” to maintain their cooperative relationship with their clients.When a certified public accountant finds a job in a new firm,his /her client will follow the accountant to a new firm in order to obtain a lower audit fee.This close relationship between the signed CPA and the client does not adversely affect the quality of the audit,but it can improve the audit quality.It should be noted that the conclusion of this case analysis may not be applicable to the phenomenon of client loss that occurs in the independent audit market.The influence of the close relationship between the CPA and the client on the audit quality still deserves the attention of the academic and regulatory authorities.