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Audit Market Concentration, audit Firm Industry Expertise and Audit Quality

Posted by PaulRobinson
TAGS: Market_concentrationaudit_firm_industry_expertiseaudit_quality
The nature of the audit market competition and the accounting firm’s behavior and performance in competitive environment is an important topic in auditor areas. The theory of SCP in industrial economics pointed out that the market structure affect the behavior of enterprises, thus affect market performance. We pay attention to the market structure because it affects market performance.Currently, it is a beginning in China to study the audit market structure, most of the study about the concentration of accounting firm, that is to say market structure .we study market concentration using the method of descriptive statistics in earlier studies and make some conclusion that there is a trend about high concentration. Industrial economics point out that the main reasons affect audit market structure is economics of scale, product differentiation and diversification. In the audit market accounting firm using industry expertise to produce economics of scale and generate differentiated products to achieve competitive .Thus accounting firm’s industry expertise is an important factor in audit market structure .But there are little literature about accounting firm’s Industry Expertise in China, especially put industry expertise as a main factor in audit market structure. Thus, for this reason, we use the listed company in shanghai and Shenzhen market as the research object and use the data of 2007 and 2008 as study sample. From the audit market concentration and the accounting firm’s industry expertise to study the how the market affect the structure audit quality which is the core Indicator of market performance. We use software about spss17.0 for data processing.Empirical results show that in China’s current audit market, audit market both concentration and industry expertise of the accounting firms have a positive effect on audit quality, in consequence, we point that the audit market structure of China has begun gradually being improved, and proposed to establish oligopoly market structure.
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