Accounting Firm Audit Quality Audit Costs Perspective Study

With the development of market economy, especially in the securities markets. As the "economic police",the CPA play an very important role in the Economic life. Accounting firms as a self-orgnization, they have to charge fees to maintain their own development. In order to keep he quality of the audit, the audit must pay the cost. In China, the audit of listed companies do not need high level of Audit report and the suppling of low-level reports are too much,that make people doubt the audits in recent years. Since the China securities regulatory commission requires the listed companies to publish their annual audit costs, many scholars begin to research the audit fee and audit quality, but there is little researchers research the audit quality of CPA based on the audit fee. Now, on China audit market, our major problem is the relation between audit fee and audit quality.Based on the above analysis, this paper believe that our market does not demand or high quality audit reports.In order to seize more client resources, the CPA launch a fierce competition, so we think that there is "low-balling" behavior in China. This paper uses the data of 2003-2008 of those listed firms in Chinese Securities Market to analyze. The research confirms that the relationship between audit fee and audit quality does not show a linear relationship.Due to the special audit of products, many small accounting firms in China and the homogeneous of audit services, there is "low-balling" phenomenon. Under the fierce market competition, in order to attract customers and compete for market the majority of accounting firms begin to reduce audit costs and cut the necessary audit procedures, the audit quality is difficult to be guaranteed. Such low level of competition is not good for the development of China's audit market. However, when the the audit fee increase, the writer find that the quality improves quickly, which shows that Chinese CPA do not completely lose their independence and they can identify the earnings management.The auditors need more time to audit the companies that have been issued by the non-standard reports. Because of auditors have puliced their problems, even if they exist higher earnings management,we also assume that they have high quality.China's audit market is still the buyer's market, the market demand for high quality audit reports severe is little. The purpose of listed companies employ certified public accountants is to meet the regulatory departments.In this environment purchasers and users are different interest groups,buyers often pay more attention to the amount of audit fees. In China accounting firms do not gain market share by improving their audit qualities,but by fiercing price competition.In this case the accounting firms are often at a disadvantage, they are only the price taker. Although there are some companies have higher fees and earnning management,we can't say they give more money to gain a pefect audit opinions. The higher audit fee is for the audit time and audit risk increased and the compensation of the expected future loss.This paper think that it's not realistic to trust the market,which can't form a reasonable price and high quality audit reports in the low price competition of China.The government should guide the price of audit,and make the lowest fee in order to prvent the "low-behavior".To create the need of high qulity of audit reports,the social crdit system should be improved as soon as quickly.