The Research On The Model Management Of The Auditing Charge Of Principal-Agent

Since the theory of agency-cost was proposed by Jensen and Meckling(1976), the view that auditing conducted by the CPA is based on the principal-agent relationship between accounting firms and audit units has been clearly recognized by scholars both in accounting and auditing fields. Simunic(1980) proposed the model for audit fees, which eventually erected a theoretical bridge between the study of principal-agent theory and audit fees. However, after the development of theoretical and empirical research in the past three decades, the research of CPA fees based on the principal-agent theory still has some shortcomings. On the one hand, scholars still tend to analyze the problem from the viewpoints of agency cost within the company, namely, ownership and management rights, size options and so on, while ignoring the principal-agent relationships between audited companies and accounting firms, and the relationships between CPAs and the accounting firms. As a consequence, the studies between the two are still in a relatively fragmented state. On the other hand, although a few studies analyzed the CPA fees based on the principal-agent theory, accounting firms and CPAs, whose objective functions were assumed to be the same, were considered as the same entity, thus ignoring that there still existed a principal-agent relationship between accounting firms and CPAs. According to those shortcomings above, this article attempts to use a theoretical model to associate the problems caused by principal-agent relationships in auditing, which should be viewed as two levels that has been described previously, with audit fees through establishing the innovative"Progressive double principal-agent relationship"audit fees model. Finally, we can find out the optimal audit fees, that is, how should the audit unite arrange and allocate the audit fees in order to achieve audit reports of the most independence and the highest quality, based on the principal-agent relationship. Moreover, the reasons of problems existing in our country at present are analyzed by using the new model, combing with China's audit quality and audit fees, and suggestions on how to arrange the audit fees system in order to improve the audit quality are made.