Abstract: Using the sample of A-share listed companies in China, this paper empirically investigates the impact of the transformation to Limited Liability Partnership (LLP) policy introduced by the Ministry of Finance in 2010 on audit report lags. We find that audit report lags increased significantly after the implementation of the transformation policy. However, this effect exists in non-Big 4 Accounting Firms rather than in Big 4 Accounting Firms; the effect of the transformation policy on audit report lags is more significant in private enterprises and in areas with weaker legal investor protection; the introduction of the transformation policy improves auditor efforts, especially for firms and clients with higher risk.

Key words: limited liability partnership, legal liability, audit report lags, Big 4 Accounting Firms