Research On The Motivation And Consequences Of The Purchase Of Audit Opinions In Family Listed Companies

China’s stock issuance system has undergone a process of gradual liberalization from the examination and approval system to the approval system and then to the registration system,and the channels for the listing and financing of private enterprises,including family listed companies,have also changed from scratch and from narrow to wide.While stimulating the vitality of the A-share market,the surging listed family-owned listed companies have also brought many problems,such as the repeated prohibition and emergence of financial fraud,and the accounting firms that undertook the audit business did not issue appropriate audit reports,which endorsed the false financial reports of the family-owned listed companies and deceived the trust of regulators and investors.Fortunately,in recent years,the regulatory authorities have begun to pay attention to the purchase of audit opinions by listed companies,and nearly 20 listed companies and intermediaries undertaking their audit business have received inquiry letters issued by the CSRC on the purchase of audit opinions,of which nearly 70% of the listed companies that received the inquiry letters are family-owned listed companies,which has triggered the consideration of the motives and consequences of the purchase of audit opinions of family-owned listed companies.Based on the relevant research on family-owned listed companies,independent audit needs and audit opinion purchases,this paper first sorts out the literature related to family-owned listed companies,independent audit needs and audit opinion purchases,and adopts the element definition method to treat enterprises with ultimate controllers and companies directly or indirectly held by the ultimate controller must be the largest shareholder of the invested listed company as family-owned listed companies.The act of colluding with each other and using improper means by enterprises and independent auditors to obtain illegal benefits by issuing false audit opinions is regarded as an audit opinion purchase.Secondly,this paper introduces the violation penalty system and inquiry letter system of listed companies and intermediaries,and takes the information asymmetry theory,entrusted agent theory and economic person hypothesis theory as the theoretical basis of the article,and analyzes the shortcomings of the system so that both parties are willing to risk small penalties to carry out illegal operations.Furthermore,this paper introduces the governance structure characteristics and violations of family listed companies in China,and shows that among the listed companies that carry out illegal operations,the proportion of family listed companies remains high.However,due to the fact that most of China’s family-listed companies have a "two-in-one" equity structure at this stage,the shareholders’ meeting and the board of directors themselves under the control of the major family shareholders lack the need for independent auditing,and when the utility functions of the family controlling shareholders and external small and medium-sized shareholders are inconsistent,the family managers tend to make short-term decisions that are most beneficial to themselves and their families,including hollowing out the listed company,which will be more serious in the absence of supervision and checks and balances within the company.In order to conceal the relevant facts,the board of directors controlled by family shareholders will choose an easy-to-control firm when hiring an accounting firm and let it issue an audit opinion favorable to itself,so as to gain the trust of regulators,minority shareholders and potential investors.In addition,this paper selects Soling shares as a typical case to demonstrate its possible audit opinion purchase behavior in 2017 and2019,and analyzes the consequences of its audit opinion purchase on this basis.Based on the above analysis,this paper draws the following conclusions:(1)The purchase of audit opinions is not a unique behavior of family listed companies,but because family listed companies are an important part of China’s capital market,if the purchase of audit opinions of family listed companies is not effectively curbed,it will be imitated by many family listed companies,which not only endangers the interests of investors but also affects the healthy and long-term development of China’s capital market;(2)The unscientific governance structure of some family-owned listed companies in China is the internal reason for their financial fraud and ability to purchase audit opinions;(3)The purchase of audit opinions of family-owned listed companies can benefit the controlling shareholders of the family in the short term,but in the long run,their abnormal financial performance will eventually attract the attention of regulators and external investors,and may even face the crisis of losing family control.(4)Under the condition that the company is operating normally,the listed company will not pay more than the industry average audit fee to hire an accounting firm to conduct the audit,but will obtain the most favorable audit opinion with the lowest audit fee as possible.At the same time,in order to reduce the running-in time and cost considerations,it will not change accounting firms at will,but because in recent years,it is more and more common for listed companies in China to pay abnormal audit fees and replace accounting firms downward,which is a signal that listed companies have audit opinion purchases to seek favorable audit opinions for themselves,and external minority shareholders can consider replacing accounting firms or abnormal audit fees for reasons as a signal light for a crisis in the company’s operation.Finally,from the perspectives of family-owned listed companies,accounting firms and regulatory authorities,this paper gives corresponding suggestions to curb the purchase of audit opinions by family-owned listed companies.