A Study On The Causes And Economic Consequences Of Frequent Changes Of Accounting Firms By Listed Companies

The progress of the market economy has promoted the development and prosperity of enterprises,for which a number of listed companies have been born in China,which has also directly forced the progress and upgrading of China’s capital securities market.Accounting information as one of the most important information in the entire capital market,the quality of its information is also increasingly concerned about the entire capital market and and attention.As an accounting firm,it has been playing the role of "economic police" for a long time,which is crucial in supervising the financial status of listed companies and enhancing the quality of accounting information of listed companies.As a listed company,the choice of the firm is dominant,and with the intensification of competition in the audit market,listed companies may choose to replace the firm for various reasons,and only issue a boilerplate announcement to inform information users,in an attempt to hide the real reason for the change,bringing serious damage to information users and stakeholders.Therefore,the real motives for voluntary change of accounting firms by listed companies and the resulting economic effects deserve further research and discussion.Through the literature,it is found that the motivation for change,market reaction and related information disclosure issues are the main areas of current research,and are focused on empirical studies.For case studies also focus more on ST companies,most of them focus on listed companies that are filed by the SEC because of financial fraud,and there are relatively few studies on the change of accounting firms due to undisclosed detailed reasons for the change within a short period of time.On the one hand,the proportion of listed companies frequently changing accounting firms for various reasons remains high,in response to which CICPA also frequently interviews firms to prompt the risk of annual report auditing;on the other hand,the regulatory authorities are also paying high attention to the matter and continuously following up to promote the disclosure of information on auditing matters.Mao Ye Commercial’s two changes of accounting firm within a short period of time in November 2020 caught the author’s attention,on the one hand because the announcement was made near the end of the year,another change was made within a month,and the two changes of accounting firm type had an obvious polarizing effect from the level of accounting firm.On the other hand,Mao Ye Commercial has been questioned by the market since it held large-scale high-priced mergers and acquisitions in 2016 and 2018,and a number of mergers and acquisitions failed to meet expectations,and its operating ability was already questioned by the market,and a massive goodwill impairment provision was made in 2020,and the financial data was nearly cut,and the company’s annual report was repeatedly questioned by the SSE and required an opinion from the accounting firm.In this regard,this paper further explores the real reasons for the change of accounting firm and the economic consequences of the change by selecting Maoye Commercial as the research object and taking the change of accounting firm as an opportunity to explore the real reasons for the change of accounting firm and to provide some reference for regulators and investors.The case study finds that there are five main motivations for the two changes of accounting firm in Mao Ye Commercial,namely,change of management,very poor impact of the firm,restoration of reputation,financial distress,and to obtain a cleaner audit opinion.Combining the change of management of the listed company,the financial statement data,the announcement of the SSE inquiry letter,and the poor performance of the former and former accounting firms,we found that the real reasons for changing the accounting firm were not the audit fee and schedule,and the first change was largely due to the change of management,the impact of the poor performance of the firm,and the impact of reputation.The second change was made to obtain a cleaner audit opinion and further revealed some interaction between financial distress and its existence.In response to the second change of firm,the capital market gave a negative market reaction in terms of market reaction and some attention and follow-up by the regulator and external media,and the quality of the company’s financial reporting improved significantly after the change of accounting firm in terms of the absolute value of manipulable accrued profits|DA|.Although the audit cost is reduced in general,it is still high compared to the same industry,and the subsequent accounting firm also appears to be more cautious in terms of key audit matters,while the audit procedures performed are more abundant and complex.For investors,they need to pay more attention to and follow up on the behavior of changing firms of listed companies to stay vigilant and avoid damage to their own interests.In this paper,by selecting specific cases and combining the existing research results at home and abroad,we take the change of accounting firms of listed companies as the entry point and propose the main research contents and research directions,thus laying down the logical framework of this paper.The case study is analyzed in depth,and the motivation and economic consequences of the change of firm of the case company are analyzed in detail.On the one hand,it enriches the case study results and helps to improve the theoretical framework and research concept on the relationship between corporate stakeholders and accounting firms,and further enriches the research on the change of firms of listed companies,which has certain academic value.On the other hand,through detailed analysis of specific cases,this paper provides some empirical references for other listed companies and accounting firms to avoid repeating the same mistakes,and also tries to draw the attention of relevant authorities to collect relevant case experiences and further strengthen the supervision and disclosure policies of similar behaviors.Especially for investors,listed company announcements are their main source of information,and this paper unfolds through listed company announcements to provide investors with some empirical references and analysis directions to avoid blind investments and jointly promote the healthy development of the whole audit market and capital market.