Research On Influence Of Audit Market Structure On Audit Pricing

Audit pricing, as the important economic links between accounting firms and audited firms, is a very important subject of audit study. Whether criteria for the audit pricing is fair, it will directly affect the independence of accounting firms and certified public accountants, and the quality of information disclosure of listed companies and audit quality. The study of audit pricing helps the subjects of the stock market to further understand the audit market and the service provided. At the same time, the regulatory authorities will regulate the stock market and certified public accountants in a better and easier way. As a two-way choice process, audit pricing requires negotiation and agreement between two sides. That's the reason why we must study the elements which two sides involved take into consideration separately. Elements related to the audit market structure, which is known as the external environment for accounting firms, must have an effect on audit pricing, which will affect the audit fees computed by the accounting firms. This thesis focuses on how the scale and the specialty of the accounting firms and the concentration of the audit market influence the audit pricing.The thesis mainly consists of five parts. The first part introduces the background and the importance of the subject as well as the structure and content of the paper. The second part is mainly for domestic and international literature review of the study. The third part talks about the theoretical basis for research, which includes supply-demand price theory of commodities, principal-agent theory, asymmetric information theory, market signaling theory, all of which provide theoretical support for hypothesis of empirical research in the following part. The fourth part proposes three hypotheses based on theoretical analysis and it constructs this empirical research model, introduces the source of the sample data and filters the sample data, as well as explains some of this empirical research methods. The sixth component is on the basis of the empirical research model, which draws conclusions in this paper, and makes recommendations for some existed limitations and improve measures in the research process.Through the research find that: The larger the accounting firm is, the higher the audit pricing becomes. However, it is not the main factor. Taken the client assets, their income and audit pricing into consideration, it is worked out that the concentration of the domestic audit market CR4 is between 35% and 50%, CR8 45%-80%. This market is a low concentration state of competitive oligopoly according to the industrial division of monopoly and competition raised by Bain. On the other hand, it suggests that the domestic market is a atomic (highly-competitive) market according to the number of the clients. There is a positive correlation between the audit market concentration and the audit pricing. We do have CPA firms' industry specialization in the domestic audit market; however, the specialization is still in a low degree and only the top ten accounting firms have the CPA firms' industry specialization. Audit pricing has a significant positive correlation with the CPA firms' industry specialization.