Empirical Study Of The Association Between Audit Committee Characteristics And Audit Fees

The independence and expertise of audit Committee are two important inherent characteristics of audit committee. Prior related foreign researches suggest that independence and expertise are major participants in the process of audit committee carrying out the duties related to external audit issues. This study examines the association between the inherent audit committee characteristics and audit fees in China, in order to discover and analyze the impact of audit committee on external audit, and to examine the overall effectiveness of audit committee. Our empirical results show that audit committee independence and expertise are significantly and positively associated with the audit fees, which is consistent with our hypotheses. However, the joint impact of audit committee characteristics and the impact of audit committee's establishment on audit fee are not significant, and the establishment leads to slight reduction of audit fees. These results suggest that at present audit committees of the listed companies in China have played a certain role in corporate governance, but its positive functions have not yet been fully played for lack of audit committee independence and demand of the listed companies for a high level of corporate governance. Finally, the paper points out the main problems of the audit committee system in China, and make some recommendations to enhance the effectiveness of audit committee, and to improve the corporate governance in China.