Abstract:Using sub provincial local state-owned enterprises (SOEs) from 2007 to 2019 as the research sample, the impact of the reform of the management of personnel and financial resources of sub-provincial local audit institutions on the audit risk of local SOEs, which started in 2015, was empirically examined by constructing a double difference (DID) model. The findings show that this kind of reform has reduced the audit risks of local SOEs due to the increased independence and authority of local audit bodies. The reform is more thorough in regions with high levels of economic development and low financial pressure and in enterprises with weak investor oversight, and thus having a more significant effect on the reduction of audit risk of local SOEs; furthermore, the reform of the management of human and financial resources mainly further reduces the audit risk of local SOEs by improving the quality of national state audits and reducing their agency costs. The findings have important implications for improving Chinas audit management system and strengthening the audit supervision system.