Study On The Association Between Internal Control Quality And Auditing Pricing

Internal Control Guidelines of Listed Companies in Shenzhen Stock Exchange and Internal Control Guidelines of Listed Companies in Shanghai Stock Exchange represent that China's regulation over internal control of the listed companies has entered a new stage.The year of 2007 is the first year for a full disclosure of listed companies' self-evaluation report on internal control,which makes the study of the quality of internal control possible.In this thesis,our research sample includes 347 A-share listed companies in Shenzhen in 2007 and we mainly focus on the correlation between the quality of internal control and audit pricing by means of the empirical method.This thesis firstly makes clear some key concepts such as the quality of internal control and auditing pricing,then theoretically analyses the influencing factors in detail and gives a literature review,and suggests that the auditing pricing is mainly related to auditing cost,auditing risk and auditing quality.After that,eight hypotheses are developed and a multivariate linear regression model is established including these eight explanatory variables.These explanatory variables are the quality of internal control,the size of total asset,the number of the consolidated subsidiaries and whether or not audited by the "Big Four" accounting firm and so on.Through descriptive statistics and regression analysis,we come to the empirical conclusion—the size of the total assets of listed companies,the number of the consolidated subsidiaries,as well as the variable whether the auditor is the "Big Four" accounting firm effect the induced variable—auditing pricing most or show a significant and positive correlation.Our key variable—the quality of internal control has a positive impact on auditing pricing,yet this relationship is not significant enough.This conclusion is in line with China's actual situation.At the initial stage of the full disclosure of self-evaluation report on internal control,the majority of listed companies only comply with the policies and regulations in form and the disclosure quality is not high.To change this situation,the regulatory authorities should further strengthen the work-related.