The Empirical Study On The Determinants Of Audit Fee

As it is known to us, not only shareholders can assess the performance of manager but debtors can assess the solvency of the enterprise according as auditing report, and it provides all the potential investors the basis in decision making. Therefore we pay much attention to the quality of auditing report; meanwhile it is crucial and meaningful to study how the auditing service is priced. At early time in Britain, American, Australia and all the countries with mature capital market, it is stipulated that charges pay for the accounting firm have to be referred in the annual report of listed company. So that it is convenient for most investor to judge the independency and the service of the accounting firm, whereas in our country most investors know less about the charges of accounting firm, not until December 24 2000, China Security Supervisory Committee issued Information Reporting Regulations of Public Offering Security Companies NO.6---Reporting of Charges for Accounting Firms to require it to be mentioned, did the mysterious mantle of auditing charges being removed. By the investigation of the writer, there has been no unified nationwide norm on auditing charges for long. In some parts of the country the regulation is instituted by the local treasury section or committee of this industry, in other parts it is by pricing section. There is great variance both in the norms of auditing charges and even in the basis. For instance, Beijing and Chongqing base the charges upon total amount of assets whereas Zhuhai upon total amount of registered capitals. In addition four international leading accounting firms charge evidently more than domestic firms. All the above are the situation and character of our country and anyway what is the decisive factor of our country's auditing charges behind it. This article takes the advantage of positive studying method upon this issue and draws some relative valuable conclusions. In addition to introduction, this article consists of five parts and major contents are as follows: The second part mainly focuses on the review of relevant documents from domestic and overseas, and also on the summary and comparison of former study. It lays foundation for this article. Major documents are concerned with Simunic(1980), Philip Chen and Mahmoud Ezzamel(1991), MichaelFirth(1985),.WangZhenlin(2002),Liubin,YeJianzhong,LiaoYingyi(2003)ZhuXiaoping(2004),WuLina(2003) The third part is the theoretical analysis of auditing charges, auditing quality and auditing independency, in which two main points are argued. One is auditing charges to a certain extent is partially the assurance of auditing quality, and another is the pricing model of auditing service is able to influence the independency of CPAs. The fourth part studies the determined factors in 2002 and 2003's auditing charges. Listed company from top five economical developed regions are as the samples. Multi-linear regression model is used by taking the natural number logarithm of auditing charges as interpreted variables and taking the complexity of auditing, company scale, auditing risk, and character of accounting firm, and other index characterizing listed company and interpretive variables. In the model reckoning ordinary least square (OLS) is used and in parameter verification ordinary statistical verifying method is used.Final conclusion is that in 2002 five variables are notably relevant. They are dimensions of asset, the number of the sub company in consolidating report, whether or not the listed company is special treated, whether the accounting firm is among top 12, whether the accounting firm are local to the company. In 2003 whether the listed company is confronting the situation of maintaining the qualification in the stock market is the addition to 2002. The explanative capability of the model is 48.3%(2002) and 53.6%(2003) respectively. Besides, the article has the odd factor regression in auditing charges and company dimension, and get the explanative capability 40.4%(2002) and 42.8%(2003) respectively. The fifth part studies the factors that cause the variance in auditing charge between 2002 and 2003. 130 of 214 sample companies that having variance between the two years are taken as study objects. Multi-linear regression model is used by taking the difference of natural logarithm of auditing charges as the interpreted variables, taking the representative indicators that measuring the variance of company asset dimension, variance of complexity of auditing service of listed company, auditing opinions shifting from non-standard to standard, alteration of accounting firm, the variance of proportion of variable asset in the total assets, variance of assets and liabilities ratio, and the variance of net assets income ratio. In parameter verification, general statistical verifying method is taken. Finally the conclusion I got is that the variance of company dimension, the variance of the number of sub-company in consolidating financial report, annual auditing opinions shifting from non-standard to standard are notably relevant to the variance of auditing charges. Other variables have no distinguished influence upon auditing charges. The explanative capability of the model is 7.7%.