Soft Budget Constraint, External Collateral Loans And Audit Pricing

Based on the institutional background of China's transition economy, this paper examines whether audit firms consider listed companies'financial risks resulted from external collateral loans when they are pricing. The study shows that:(1) state-owned property does not affect the auditors of listed companies charge audit fees according to the financial risk of external collateral loans. (2) compared with listed private companies, the soft budget constraint the state companies beard decreased the level of the risk from external collateral loans, the positive correlation between the audit pricing and the collatration weakend; (3) in the area with strong government intervention, the more softened budget constraint decreased the level of the risk from external collateral loans, the positive correlation between the audit pricing and the collatration weakend; (4) high financial development level harden the budget constraint, in the list companies in the developed area of financial, the positive correlation between the audit pricing and the collatration weakend; The results prove when audit firms are pricing, they not only consider listed companies' financial risks resulted from external collateral loans, the amount of external collateral loans, but also adjust audit fees according to the degree of soft budget constraint. Recommends that the Government should reduce administrative interference, strengthen commercial banking reform, improve the financial system. To avoid affecting the auditor judgments. And the auditor should further improve the quality, not just charge risk premium to compensate for the increase in audit risk.