Abstract: There is a new phenomenon that listed companies do not have ultimate owners. Solving the managers agency problem becomes a key issue for corporate shareholders when there is no monitoring from ultimate owners. This paper examines the effect of ultimate owners’ in-existence on high audit quality. The results show that the in-existence of ultimate owners could cause high probability of Big4 auditing and more audit fees. The effect passes on in such a manner that the in-existence of ultimate owners weakens shareholders’ self monitoring and then results in their demand for high quality auditing outside. About the cross-section, this paper finds institutional investor and financial development can be mediators between the in-existence of ultimate owners and high audit quality. This paper also compares multiple large shareholders and management equity incentive’s in terms of their respective effect on high-quality auditing and concludes the former is ineffective but the latter is effective.

Key words: ultimate owner, in-existence, corporate governance, high quality audit