The Study Of Customer Flow Of Li Xin Public Accounting Firm After Continuous Reputation Damage

Audit reputation refers to the degree to which the public trust and praise the audit quality of certified public accountants.It is composed of Popularity,Praise degree,customer loyalty and other intrinsic qualities.Those public accounting firms that have high audit reputation can get more customers and excess revenue.When public accounting firms’ reputation is too low,they will be punished for triggering the audit reputation mechanism.Audit reputation mechanism is a kind of normative mechanism formed spontaneously in the audit market.With the auditing reputation of firms as a signal,the auditing quality of firms can be transmitted to the capital market.A mature and effective auditing reputation mechanism can help the orderly development of the auditing market.Therefore,it is of great significance to explore the mechanism of auditing reputation.There are two main mechanisms of auditing reputation mechanism: reward and punishment.Compared with the characteristics that it is difficult to measure whether high reputation is rewarded or not,the economic consequences of triggering punishment mechanism after reputation damage are often easier to study and observe.Most scholars’ research on reputation damage is based on one or more cases of reputation damage in different firms at the same time.There is no continuous analysis of the damage to the reputation of the same subject.This paper expects to keep track of many reputation damage incidents in the same accounting firm.In recent years,Lixin public accounting firm has been punished by the CSRC for four cases,such as Shanghai DZH Limited,Kanghua Agricultural Company,Geeya Technology CO.,LTD and Hubei Yangfan Holding Co.,Ltd.,which meets the condition of consecutive reputation damage.At the same time,Lixin public accounting firm occupies a high position and is one of the top four in China,so research on it is more representative.Therefore,this paper chooses the LiXin public accounting firm as the main body of this case study,and takes the customer flow after its reputation is damaged as the research object,to explore whether the auditing reputation mechanism is effective in our country,and whether the expression of reputation penalty mechanism is cumulative when the continuity of reputation damage.Through sorting out the reputation incidents of LiXin public accounting firm in recent years,this paper takes the period of 2014.04.30-2018.04.30 as the observation period,and based on the auditing customers of Listed Companies in 2013,analyses the auditing customer flow of LiXin public accounting firm in 2014-2017 by analysis the direction of leaving customers,and analysis the bargaining power of the inward customers.A large number of studies have shown that audit fees are positively correlated with the total assets of the auditees at the end of the period,so this paper puts forward the concept of relative audit fees for fear of the impact of listed companies’ own development on audit fees,and on the basis of this concept,analyzing the bargaining power of customers.Through the analysis of the customers’ whereabouts after LiXin public accounting firm continuous reputation damage,this paper finds that there is no large-scale customer loss after Lixin Institute’s reputation damage,and the listed companies that choose to change have no obvious tendency to high reputation firms.In the process of analyzing the relative audit fees of the original customers,we find that the bargaining power of audit client has been improved after the reputation damage event occurs.The bargaining power of audit client has been improved,and with the continuous occurrence of defamation events,the proportion of bargaining power enhancement has gradually increased.From this point of view,the defamation event will affect the ability of public accounting firms to obtain audit premiums,but it has less impact on promoting customers to change audit institutions.Our country’s audit reputation mechanism has some validity.Through the analysis of the change of the average relative audit fees of Lixin public accounting firm in 2013-2017,it is found that the average relative audit fees of Lixin Institute show a downward trend in the whole observation period,which indicates that the bargaining power of Lixin public accounting firm has declined and the reputation premium for providing audit services has gradually decreased,which proves that the continuity of reputation damage will strengthen the expression of reputation punishment mechanism to a certain extent.Finally,this paper puts forward feasible suggestions for the development of audit firms and the improvement of audit market in China.