[财务管理]或有租金与审计独立性.pptVIP

Aggregate Quasi Rents and Auditor Independence: Evidence from Audit Firm Mergers in China 1.Introduction In an influential study, DeAngelo (1981) shows that auditors’ commitment to independence is positively related to audit firm size. She argues that large audit firms have more aggregate quasi rents, which are defined as audit fees in excess of audit costs, to serve as collateral against opportunistic behavior on the part of auditors. Because the auditors in large audit firms have more to lose if they fail to report breaches in clients’ accounting reports, they are more motivated to provide higher quality audit services. Consistent with this argument, researchers have found that audit firm size is positively correlated with audit quality. However, empirical evidence on the relationship between audit firm size and auditor independence is confounded by a number of factors First, as Watts and Zimmerman (1986) point out, audit quality is a joint product of an auditor’s competence and independence. Large audit firms are better able to recruit graduates from leading universities, hire reputable specialists from the labor market, and offer specialized training to their staff. Peer reviews are also more prevalent and rigorous in these firms. The second confounding factor is the brand-name effect. The brand name investment model (Klein and Leffler 1981) predicts that auditors are motivated to maintain audit quality to protect their brand name once it has been established. Finally, the match between clients and auditors is not random. On the demand side, clients select the audit firms that best meet their need to lower costs (Johnson and Lys 1990). On the supply side, audit firms select their clients strategically to reduce audit risk (Shu 2000; John stone and Bedard 2004). Using data on audit firm mergers in China, we investigate the empirical relationship between audit firms’ aggregate quasi rents at stake and auditor independence in a settin