Audit Supervision, State-owned Assets Supervision and State-owned Enterprise Governance: A Study Based on the Background of Audit Officials in State-owned Assets Supervision

Abstract

In the context of the deepening reform of state-owned enterprises (SOEs) and particularly the duty of accountability audit and supervisory committee assigned to the government audit offices during the recent reform of government institutions, audit supervision plays an important role in the supervision of state-owned assets (SOAs) and the governance of SOEs. The existing literature mainly studies the governance effect of government audit on the listed central SOEs based on the audit finding announcements of central SOEs issued by the National Audit Office, but it generally regards government audit as a black box. In fact, officials usually play an active and significant role in the government’s decision-making. Therefore, this paper tries to examine the underlying mechanism of the governance effect of audit supervision on SOEs from the perspective of the background of audit officials in the supervision of SOAs.We conduct an empirical study with a sample of A-share listed local SOEs from 2003 to 2017, and find that the background of audit officials in the supervision of SOAs can improve the accounting information quality of SOEs. This result is more significant when audit officials’ supervision experience of SOAs is longer, audit enforcement is more powerful, and SOEs’ internal corporate governance is weaker. But the intervention of local leading officials due to political promotion incentives can weaken the governance effect of audit officials on SOEs. Further analysis indicates that the background of audit officials in the supervision of SOAs also has a real effect on SOEs, which can reduce the real earnings management, improve innovation performance, and ultimately increase the firm value.The findings of this paper not only confirm the heterogeneous impact of audit officials’ subjective initiative on the supervision of SOAs and the governance of SOEs from the perspective of individual work experience, but also reveal the transmission path of local leading officials’ influence on the decision-making of micro enterprises from the perspective of government audit, a professional administrative institution. Meanwhile, in the process of realizing the integration and optimization of audit supervision power and establishing a unified and efficient audit supervision system for the supervision of SOAs, the regulator should not only pay attention to training and improving the professional competence of audit officials through position experience, but also further strengthen the independence of audit offices and audit officials through deepening reform.