The Moderating Effect of Top Management Team’s Power on the Relationship between CPA Independence &amp; Audit Quality

Ching Yen Li,Chao Sheng Liu,Faradillah Amalia Rivai

doi:10.53893/ijrvocas.v1i4.75

Abstract

This research integrates the top management teams (TMT)power theory, CPA economic independence theory, and reputation maintenance theory to explore the impact on audit quality. This study used the sample of firms listed on the Taiwan Stock Exchange (TSE) and Taipei Exchange (TPEx) from 2009 to 2016. The empirical results show that as the TMT power of Taiwan companies increases, the audit quality is higher. It is different from the general research that the TMT will conduct earning management based on self-interested behavior. The inference is due to Taiwan's relatively high proportion of family companies. In the face of the trend of social responsibility and the requirements of regulatory agencies, the company’s strategy of maintaining corporate image and successfully operating over to the next generation is presented with high audit quality. In addition, when CPAs face important clients, the CPA’s economy depends on important customers is greater than the effect of reputation maintenance, the audit quality will be reduced. When the TMT power is greater, it will offset the CPA's economic independence effect and enhance the audit quality.

Highlights

This paper investigates the moderating effect of senior managers, the greater the power of senior Top management team’s power on the managers
OWN is defined as the shareholding ratio of senior managers, where the higher the shareholding ratio of the more they can influence board decisions [3, 4] and the last proxy is FAMILY where it defined as family senior managers
Our result found that the power of the top management team is negatively correlated with audit quality, and the independence of CPAs is positively correlated with audit quality, which supports Hypotheses 1 and 2

Summary

Introduction

This paper investigates the moderating effect of senior managers, the greater the power of senior Top management team’s power on the managers. CEODU is defined as a CEO duality where relationship between CPA independence and it refers to the chairman concurrently serving as the auditing quality. Investigating this issue can provide general manager. Relevant research points out that the controlling family has a large number of nondiversified equity, which can be used as the chairman of the board of directors through controlling equity, and control the positions of senior managers. It is in the company's unique position [5,6,7]. The judgment of a family business in data is taken from the Taiwan

Methods

Results

Conclusion