An Empirical Study of Accounting Firm Scale and Legal Environment Influence on Audit Quality

Abstract. China's overall weak legal system environment and clear regional legal system differences existing side by side provides the research background for us to study the relationship between accounting firm scale, legal environment and audit quality. In this paper, using the data of 2014, under China's unique legal environment background, classify according to accounting firm scale and background, take manageable accrued profit instead of actual audit quality, empirically testify the relationship between legal environment, firm size and audit quality. With the development of market economy and particularity of certified public accountants work, audit quality directly relates to healthy development of capital market. The scale of accounting firms must, therefore, improve information quality as the premise, and large-scale development must also be on the basis of ensured audit quality. In our country, whether there is a difference between large and small audit quality, whether it relates to law environment, whether there are other influence factors, the academia has not yet been determined. And discuss the accounting problems in China shall consider China's national conditions. In general, the rule of law environment is weak in our country. From the angle of region, local legal environment development is not balanced. Will legal system differences in different areas, then, affect different size firm's audit quality? I. ACCOUNTING FIRM SCALE MEASURE In the study of accounting firm scale and audit quality, accounting firm can be divided into N big and not N big dichotomy, which is widely used in the literature at home and abroad. Especially in western developed countries, the division of N big and not N big is very stable. A. Research design 1. Research methods We choose to have clustering analysis with a strong objectivity to test classification results significantly and can comprehensively consider certified public accountants ’ indicators to analyze 2014 accounting firm situation. 2. Data collection (1)Data selection indicators In this paper also uses multiple indicators measure in the course of study