The Implementation Of The New Security Law,the Size Of Accounting Firm And Audit Quality

On March 1 2020,The Securities Law of the People’s Republic of China(new Securities Law)was officially implemented,marking that the securities issuance approval system implemented in China for nearly 20 years will officially withdraw from the historical stage and the registration system will gradually replace it,which means that the development of China’s capital market has entered a new stage from the approval system to the registration system.The reform of registration system brought about by new Securities Law will become a major change in the development of China’s securities market.At the same time,in order to meet the stricter information disclosure requirements of the implementation of the new law and the reform of the registration system,new Securities Law also puts forward higher requirements for the responsibility and adaptability of securities intermediaries.Securities service institutions have always played an important role as the "gatekeeper" of the securities market in China.Their diligence is of great significance to supervise the securities fraud of issuers and protect the interests of investors.Especially after the implementation of new Securities Law,as an intermediary connecting listed companies to investors,its responsibilities are becoming more and more heavy.After the reform of the registration system,investors are more sensitive and dependent on the feedback of intermediaries.In a word,whether the legal liability of intermediaries is perfect and whether the audit quality of intermediaries can be guaranteed have become the focus of investors.Therefore,a deep understanding of the impact of the implementation of new Securities Law on audit quality is of great significance to protect the legitimate rights and interests of investors and promote the healthy and stable development of the securities market.In order to explore the impact of new Securities Law on the audit quality of accounting firms,this paper is based on the principal-agent theory,information asymmetry theory,reputation mechanism theory and "deep pocket" theory.On the basis of combing the relevant literature at home and abroad,this paper puts forward the research hypothesis that the implementation of new Securities Law can significantly improve the audit quality of accounting firms and the scale of accounting firms can regulate the process.This paper measures the audit quality by the absolute value of controllable accrued profit and the absolute value of real earnings management,selects the financial data of Shanghai and Shenzhen A-share listed companies from 2017 to 2020,compares the changes of audit quality in the two years before and after the change of Securities Law through empirical research,and finds that after the implementation of new Securities Law.The absolute value of controllable accrued profit and real earnings management of listed companies has decreased significantly,the level of earnings management has been effectively restrained,and the audit quality has been significantly improved.At the same time,considering the regulatory role of the scale of accounting firms,it is found that after the implementation of new Securities Law,the international top four accounting firms have significantly improved the audit quality than the non top four accounting firms.This conclusion is still valid after the robustness test of alternative core variable measurement indicators and sample range.Based on the empirical results,this study puts forward the following suggestions: first,improve the institutional environment of the audit market and strengthen the legal responsibilities of accounting firms;second,encourage accounting firms to become bigger and stronger.