Public Accounting Firm Merger's Impact On Audit Quality

With the promotion of the Chinese Institute of Certified Public Accountants and the Ministry of Finance,the merger of accounting firms has been heatedly discussed by the CPA profession.Since 1997,China's accounting firm industry has experienced three large-scale merger waves.Looking at the development of the firm in recent years,the merger road has become an important way for the firm to rapidly expand its scale.In 2013,Crowe Horwath merged with RSM China,and Ruihua Certified Public Accountants,the largest domestic company,was established.The establishment of Ruihua broke the pattern of "Big Four" leading the "domesticism" and established the national brand of the accounting firm.However,at the same time as the scale has been expanded,has the quality of the audit been improved?This is a topic worth exploring.This article is based on the merger of Crowe Horwath and RSM China under the third wave of consolidation to try to explore the impact of mergers on audit quality.This article starts from the perspective of "customers",discusses the audit quality from the audit results,and divides the audit results according to different opinions into four different situations.This paper selects the annual report of A-share listed companies from Shanghai and Shenzhen in 2010-2016 as the data,measures the quality of the audit with "non-standard audit opinion ratio"and "earnings management",and studies the content of two aspects:the consolidation of accounting firms as a whole and local level influence.Through the analysis of the indicators,the conclusions obtained in this paper are as follows:At the overall level of Ruihua Certified Public Accountants,the quality of audits in the year of merger was significantly improved,but the quality of audits has been declining year by year since the merger,and the role of mergers in promoting audit quality has not been realized.It will continue in the following years.At the local level,the merger has different effects on the audit quality of overlapping and non-overlapping audits.After the merger,both compromises increase,but the independence of overlap decreases and the independence of non-overlap increases.After the merger,due to the integration of resources,the audit quality gradually converged.Through the combination of the two aspects,the paper also finds that the audit quality of Ruihua Certified Public Accountants is largely determined by the overlap.Through the analysis of the conclusions,the accounting firm was inspired to focus on the degree of coincidence between the two parties before the merger.Rationally choose the target of the merger,actively integrate after the merger,attach importance to the quality of the audit throughout the consolidation process,and strengthen the quality of the local audit,in order to achieve substantial unity,really through the merger "bigger and stronger."...