| The two-way flow of auditors between accounting firms and listed companies is a common economic phenomenon,which has a significant impact on the quality of audit services and is one of the common concerns of both practice and academia.Although there are controversies about the relationship between this phenomenon and audit quality,most articles conclude that the "revolving door" phenomenon is detrimental to audit quality,and with the occurrence of a series of financial fraud scandals such as the Enron incident and the collapse of HIH insurance company,relevant policies and regulations have been introduced at home and abroad to restrict this phenomenon.In addition,with the occurrence of a series of financial fraud scandals such as the Enron incident and the collapse of HIH insurance company,relevant policies and regulations have been introduced in China and abroad to restrict this phenomenon,such as Sarbanes-Oxley Act,Act 9 and No.4 of the Code of Professional Ethics for Chinese CPAs.In this context,this paper selects a typical and complete case as the initial study to examine whether the change in auditor status has an impact on audit quality,and whether it has a positive or negative impact.Company Z and its auditor,C.A.C.,were selected as the subjects of this study.The first step was to fully understand the complete formation process of the "revolving door" phenomenon in Company Z,i.e.,the formation process of two types of relationships,i.e.,employment relationship and firm affiliation,and then to identify alternative indicators to measure audit quality and analyze the "revolving door" phenomenon before and after the "revolving door" incident.The study found that: "The revolving door" is a very important issue.The study finds that before the "revolving door" phenomenon,the financial information and data disclosed by the firm did not truly reflect the operating conditions,and the quality of accounting information was low,and the issuance of the CICPA penalty announcement further indicates that the signing CPAs failed to maintain due professional skepticism,thus providing relatively low quality audit services.After the occurrence of the "revolving door" phenomenon,the financial information and data disclosed by Z Company were synchronized with ST Kangmei God at the time of financial fraud,and had the same shadow as the financial fraud case through concealing connected transactions in 2010,thus reasonably inferring that the financial data were suspected of fraud,and the corresponding annual audit reports were all standard unqualified opinions The audit reports for the corresponding years were all standard unqualified opinions,thus indicating that the audit quality provided by the accounting firm was relatively low.After the "revolving door" incident,the financial information and data disclosed by Company Z were synchronized with those of ST Kangmei at the time of the financial fraud,and had the same shadow of the financial fraud case through concealing connected transactions in 2010,thus it was reasonably inferred that the financial data were suspected of fraud,and the corresponding annual audit reports were all standard unqualified opinions.Therefore,it indicates that the audit quality provided by the accounting firm is relatively low.Based on the findings of this paper,the following countermeasures are proposed:from the level of the audit subject,we should limit the hierarchy of auditors before and after job-hopping,and then adjust the length of the "cooling-off period" through classification and focus on the difference to prevent attention,and strengthen the disclosure of information on the mobility of signatory CPAs.At the level of the audit body,the audit committee’s responsibilities should be further clarified to promote the improvement of corporate governance through restraint and supervision,and the disclosure rules of the affiliation of the company’s senior management firm should be refined and improved to avoid inadequate disclosure and deliberate concealment.At the audit environment level,in order to limit the potential negative impact of employment relationship on audit quality,for listed companies with the phenomenon of "revolving door" in the current year,the regulator can sample the audit reports of both the current year and previous years to observe the quality of audit services provided by the current executives of the company when they had undertaken audit projects as signatory CPAs.The targeted sampling can help improve the quality of audit services. |
