| The fast-changing environment,the surging price and the increase of financial assets,the portfolio mode of enterprises begins to evolve from a single investment mode of manufacturing assets to the investment mode of physical and financial assets.This change need introduce fair value measurement,which requires to confirm unrealized income at the end of every reporting date.In capital market,investors also starts to appeal to accounting standards institutions to update the accounting standards for improving the comprehensiveness of financial report information and presenting the unrealized profit and loss.The Financial Accounting Standards No.130 "Comprehensive Income Report"required listed company to report other comprehensive income in 1997 and "International Accounting Standards No.1(IAS1)-Presentation of Financial Statements(Amendment)"did it again in 2007.In 2011,the FASB of the United State "Comprehensive Income Report Update" and IFRS 'International Accounting Standards 1(IAS1)-Financial Statement Presentation(Amendment)" put forward further specification for the other comprehensive income.On Feb.15th,2006,the Ministry of Finance issued "China's Enterprises Accounting Standards" and used it to account and present profit and loss.In 2009,China promulgated "Accounting Standards for Business Enterprises No.3" and"Notice on Doing a Good Job in 2009 Annual Report of Listed Companies and Non-listed Enterprises Implementing Accounting Standards".In 2014,"Accounting Standard for Business Enterprises No.30-Presentation of Financial Statements(Amendments)"clarified and regulated repeatedly that listed companies should add other composites income to the income statement.On Nov.14th,2017,the Financial Accounting Standards Committee of the United States(FASB)put forward to add the Accounting Standard Codification Topic No.225 profit and loss statement into the comprehensive income of Topic No.220,then formed a new Topic No.220 profit and loss statement-comprehensive income.The promulgation and revision of these guidelines indicate that the status of other comprehensive income has raised.The presentation of other comprehensive income is an important symbol of the change from "profit and loss view" to "balance sheet view" and an important index reflecting capital increment,which is a major reform that domestic and international financial statement reporting system has turned to "Comprehensive Income"in recent years.With the expansion of the application of fair value,both IASB and FASB has been expanding the projects and contents contained in other comprehensive income.Therefore,the importance of other comprehensive income grows with each passing day.IASB and FASB have been proposing other comprehensive income for some time.In general,at the institutional level,even the changes of the normative framework should attract much attention of theory and practice.However,the study on other comprehensive income has not drawn attention and the number of relevant documents is very limited.The existing themes of other comprehensive income studies focuses on the value relevance of other comprehensive income,which uses the data of other countries to test whether the presentation of other comprehensive income is relevant on value.Except for the serious endogenous of other comprehensive income and share prices,the themes also ignores an important premise that is the validity of data presented in other comprehensive income,that is,the examination of other comprehensive income data is audited effectively.However,does other comprehensive income really be taken seriously by auditors?For a long time,the income statement has been the No.1 Statement,and net profit also becomes the preferred indexes to give reference and decision for stakeholder.There is a serious path dependence on the current net profit and the importance of other comprehensive income is not reflected.In addition,the competition among the audit industry is fierce and audit resources are limited,so auditors may not pay much attention to other comprehensive income audit,which may have some impact on the existing research conclusions.PACOB denounced accounting firms for the audit deficiency of fair value measurements and related profit and loss more than once in public.In 2017,Joe,Vandervelde and Wu(2017)and Cannon and Bedard(2017)published many papers about fair value measurements and audit,which expressed the concern about the quality of fair value measurements,flexible loss and profit of fair value,the quality of other comprehensive income and Auditors,ability and attention in these areas.In order to verify the above propositions,this paper considers the connotation of other comprehensive income in depth.From the perspective of relationship between audit fees and other comprehensive income,the paper examines the audit fee differences between the zero and the non-zero samples of other comprehensive income and finds out the distribution of auditors on audit resources to other comprehensive income.The relationship between the size of other comprehensive income and audit fees is also analysed with the relationship between the size of other comprehensive income and audit workload.As well as the reclassification and audit risk of other comprehensive income are used to study the changes of audit fees.This research wants to verify the auditor's attitude towards other comprehensive income,strengthen the attention on other comprehensive income and the relevant research,and enlighten the revision and implementation of future accounting standards.It also provides the foundation and support for the accuracy of the conclusions of the value relevance of other comprehensive income.In order to realize the research goal effectively,the paper designs three key propositions:(1)what is the essence of other comprehensive income?What is the basis of the connection with audit fees?What are the ways and paths of other comprehensive income affecting audit fees?(2)What are the factors and fundamental mechanism that other comprehensive income effects on audit fees?Then find and lock them.(3)An effective test are used to test the mechanisms with a proper audit fee model.Based on the research proposition above,with the two basic research paradigm including "audit workload-audit fee" and "audit risk premium-audit fee",the methods of normative research and empirical research are conducted.The specific chapters of the paper are as follows.Chapter 1:"Introduction".It introduces the background,the contributions,and the framework of the paper.The second chapter is "Literature Review",which summarizes the fields and methods of other comprehensive income and audit fees research at home and abroad.The third one is the theoretical analysis.It focuses on the analysis of the essence and characteristics of other comprehensive income,as well as the pricing factors of audit fees.Then it explores the possible basis of other comprehensive income impacts on audit fees,and analyses the specific mechanism of the impact of other comprehensive income on audit fees from the.complexity of audit work and audit risk,which provides the basis for the later hypothesis establishment.The fourth,the fifth and the sixth chapters are empirical tests of influence mechanism.The fourth chapter mainly tests whether there is a significant difference in audit fees between the zero group samples and the non-zero group samples of other comprehensive income.This part aims to find out the auditor's allocation of audit resources to other comprehensive income.In order to find out whether auditors pay attention to the differences of audit workload from the size of other comprehensive income values,the fifth chapter examines the size impact of the other comprehensive income values on audit fees.Based on the fourth and the fifth chapters,the sixth chapter further examines whether auditors are more concerned with the possible risks in other comprehensive income and increase the audit fees when other comprehensive income is with earnings management.The last chapter summarizes the conclusion,policy recommendations and outlook.In according with the above research ideas and structure,we found the below main conclusions:Conclusion 1:auditors will charge higher audit fees for the sample group with other comprehensive income than the zero group.By the value of other comprehensive income,the samples are divided into zero and non-zero groups of other comprehensive income,and 0-1 dummy variables are constructed.Using the natural logarithm of audit fees as the dependent variable and controlling the related variables affecting the audit fees,the study finds that audit fees of the non-zero group of other comprehensive income are significantly higher than those of zero groups.When the non-zero group of other comprehensive income is further classified into other comprehensive income loss groups and other comprehensive income groups,the audit fees of other comprehensive income loss groups and other comprehensive income groups are found to be higher than those of zero groups.Conclusion 2:the impact of other comprehensive income on the audit activity has not been verified.On the one hand,the size of other comprehensive income reflects that of profit and loss,on the other hand,it also affects audit workload.In this paper,the size of other comprehensive income value is used to observe the auditor's attention to the size of other comprehensive income and whether there is any difference in the attention to other comprehensive income and other comprehensive loss.The study does not find any significant correlation between the size of other comprehensive income and audit fees.In another words,there is no evidence that auditors differ in the importance of determining to the size of other comprehensive income.Conclusion 3:auditors do not charge higher audit remuneration for "reclassification"of other comprehensive income under the motive of earnings management.The"reclassification" of other comprehensive income is considered as an important way which management manipulates profits.The paper uses the "change sign" of other comprehensive income in pre-term and post-term as the basis for classification of other comprehensive income "reclassification",which is divided into two situations caused by market fluctuation and active reclassification,to observe whether the reclassification of other comprehensive income would arouse the attention of auditors.However,the study does not find that the auditors charged higher audit remuneration for the sample groups with the other comprehensive income reclassification.This paper finds that auditors' focuses on not substantive but modal concerns on other forms of comprehensive income.With the trend of the increasing weight of presentation of other comprehensive income in the future,it is necessary to strengthen auditor's attention on audit of other comprehensive income.The possible innovation of the paper mainly includes four aspects:Firstly,this paper expands the scope and influence of the research on other comprehensive income.It inspects whether auditors will pay enough attention to other comprehensive income,especially increasing audit procedures to reduce risk of audit of other comprehensive income.At the same time,this paper also puts forward to some questions on the conclusions about the value relevance of other comprehensive income because it finds that the data of other comprehensive income are not audited effectively by auditors.Secondly,this paper extends previous research.Considering the meanings of other comprehensive income,it proposes the mechanism that other comprehensive income affects to the audit charge based on the complexity of audit work and the risk premium of audit.The paper analyses the meanings of other comprehensive income deeply and presents the complexity of it in detail.Then connecting to the factors of audit charge,it deduces the mechanism that other comprehensive income affects audit charge.Thirdly,this paper develops the empirical test on other comprehensive income.It verifies the influence of other comprehensive income on audit fee from different aspects,including the differences inter and intra sample groups,the static value and cross-period dynamic change of other comprehensive income.In addition,the paper verifies the attention of auditors to other comprehensive income with the samples of zero and non-zero group,income and loss group,numerical value and the change of othercomprehensive income in the earlier and later periods respectively.Fourthly,the paper responds to the research on "recycling" of other comprehensive income.In view of audit risk premium,it tests the effect of misstatement risk of other comprehensive income,earnings management risk exposed and no-exposed on the audit fee.The paper also simulates the situation that "recycling" of other comprehensive income might result in audit risk.It explores the effect of other comprehensive income on audit fee from "Natural" recycling issues and "Subjective" recycling issues respectively.It also tests the problem that auditors pay attention to the risk of other comprehensive income indirectly,and makes up the inadequacy of the "recycling" of other comprehensive income. |
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