Research On The Manager's Audit Background,Accounting Conservatism And Audit Opinions

In recent years,it has become a common phenomenon for auditors to use accounting firms as springboards for "job-hopping" to serve as senior managers in enterprises.The frequent financial fraud incidents in the domestic and international capital markets have continually aroused people's attention to the background characteristics of corporate executives,the quality of financial information and auditing behavior of accounting firms.A large number of exposed cases of financial fraud show that the auditor lost the principle of independence in the process of providing audit services,and issued an audit report that deviated from the facts in response to the needs of corporate executives to "whitewash"financial reports.The industry expertise of senior executives from job-hopping may be accompanied by the loss of audit quality.This paper examines the relationship between the audit background of top executives,accounting conservatism and audit fees to test whether CPAs can effectively identify different potential risks of enterprises,and then make corresponding audit service pricing.Using the financial data of A-share listed companies in China from 2007 to 2014,this paper empirically investigates the effects of accounting conservatism and the audit background of top managers on audit fees by constructing OLS regression models.I find that conservative accounting information can significantly reduce the audit cost of company.It shows that when the loss is reflected in the accounting report more timely than the income,the risk of business failure is reduced because market participants can predict the possibility of loss in the future and prevent it in advance.Auditors do not need to pay too much audit effort and bear a lower risk of audit failure,and then charge a lower audit fee.The audit experience of executives is positively correlated with audit fees.Because of the audit work experience of executives,they have a higher level of manipulation of financial information,which may lead auditors to pay more costs and bear higher risks in the process of auditing,thus enterprises pay higher audit costs.Further empirical evidence suggests that the relationship between accounting conservatism and audit fees is moderated by the audit background of senior managers.When senior managers have audit background,the negative impact of accounting conservatism on audit fees is stronger,which indicates that accounting conservatism can play a more inhibitory role on audit pricing in enterprises with audit background of senior managers.The conclusion of this study is helpful to understand the auditor's behavioral response to the potential risks of enterprises,and to provide theoretical support and empirical evidence for the healthy development of capital market.