A Research On The Pricing Behavior Of Audit Service Abstract

The greatest difference between independent audit and government audit is that the former is a kind of paid service. The auditors and his offices are rational economic individuals like other enterprises. They need to obtain revenues and profits by offering the products or the service to the society. But, the quality of audit is different from that of other products. Theoretically, it depends on the united probability of auditor finding customer's noncompliance and revealing this noncompliance, which is characteristic with non-observing. In the current practice, auditors are employed and paid by the administrative authority of enterprises in fact. The character of non-observing determines that price competition cannot lead to audit quality's promotion. Fierce price competition can lure auditor to accept business at the expense of lowering audit fees, sacrificing audit quality, and even colluding with manager authority. It will finally cause the phenomenon of bad money driving out good money, and the high-quality audit service will be expelled. Now, there is a furious competition in our country' securities audit market. Some audit firms do not hesitate to accept the business at low price and injure audit quality seriously. It is urgent to study the pricing behavior of audit service so as to norm independent audit service and support supervision measure of the supervision department.Examine through theory analysis and empirical research, the conclusion of this paper is: The pricing behavior or audit service have great meaning to audit quality. Rational audit pricing is the prerequisite of guaranteeing to audit quality. Generally speaking, the main considerations include the scale of auditee's inside accounting system and the anticipated loss that might suffer from public financial statements users. Meanwhile, the outside legal environment and the risk preference type of auditor and customer will determine the both sides' status in audit pricing, and then influence the ability of pricing negotiation. In addition, auditee's ownership structure, scale of the accounting firms, pricing tactics of auditor and non-auditing service are all influence the both sides' ability of pricing negotiation during pricing. Besides that, empirical research indicates following result. First, the audit pricing on the security market of our country in the whole is based on the work that needed to accomplish audit service. But because the legal environment is comparatively too loose to fully consider the customer's business risk. Accounting firms have not formed remarkable differential effect yet. Its scale does not influence audit pricing notably. Furthermore, the listed companies with larger proportion state-owned stock often have larger ability of pricing negotiation, and tend to force down audit fees.