Audit quality, audit fees and the CPA organizational forms

Abstract

In July 21, 2010, the Chinese MOF launched the Interim Provision on Encouraging Large and Medium-Sized CPA Firms to Adopt Limited Liability Partnership as their Organizational Structure (hereafter “Interim Provision”), which setting off a wave of accounting firms restructuring. We find that auditors in Limited Liability Partnership (LLP) are likely to undertake more legal liabilities and audit risks than General Partnership (GP) or Limited Liability Companies (LLC). Whether the strengthening of legal liability and audit risks will motivate firms to improve their audit quality and raise audit fees? In this study,we commence our sample with companies listed in the Shanghai and Shenzhen A-share main board markets from 2010 to 2013. Through correlation analysis and multiple regression analysis, empirical study shows that whether CPA firms have restructured or not it does not exist significant differences on audit quality and audit fees. Furthermore, CPA firms from the LLC to LLP didn't significantly raise audit quality and audit fees.