| As the fraud cases of American Medicine Company and "Enron" take place, the quality of Financial information has become the focus of public attention. Meanwhile almost each exposure of a fraud is associated with audit failure, which is very interesting. Various policies have been introduced by governments to find ways to improve the quality of financial reporting. In order to increase public confidence in the quality of financial information, policy makers shift their perspective from macro to micro. Thus, the Audit Committee, which is thought to be an important measure of corporate governance, has been proposed. According to international experience, the audit committee has the important position. China also introduce the audit committee into our country in 2001.Based on the external audit-audit costs perspective, the Audit Committee is analyzed and researched. Starting with the characteristics of the Audit Committee, the relationship between audit fees and Audit Committee is studied. Hopefully that the research in this area will be extended by the empirical tests of Audit Committee characteristics and audit fees, then some policy recommendations can be provided to the audit committee system used in China. The Audit Committee as an independent financial strength pushes the communication between internal audit and external audit, thus improve the quality of financial information and be responsible on the shareholders. Audit Committee, a Board to represent the interest of the owner, can increases the independence of external auditors at the same time. Audit committee is a bridge system between them, and audit fees link them economically, so the features of Audit Committee have an impact on audit fees.Started with the history of the Audit Committee, the root causes of motivation for the establishment of the Audit Committee and its functions are originally analyzed step by step in this paper. It has been over seventy years since the propose of establishing the "special committee" by the U.S. Securities and Exchange Council due to fraud cases of the United States Medicine Company in 1938.Audit Committee System in the west has experienced the origin and growth to the deepening stage. However, in China it began in 2002, only a short period of nine years ago, but has never been implemented. Audit committee system is continuously developed and evolved along with the occurrence of fraud causes, and is a measure proposed from the angle of an internal initiative of corporate governance based on agent-based theory. From the above history, it is showed that the initial establishment of the Audit Committee is to ensure the quality of financial information. Its main duty is to monitor the company’s financial information internally, and externally communicating with the outside auditors, and ultimately ensure the quality of financial information. As a stand-alone financial strength, audit committee communicates with the outside auditors externally, and the audit fee is the product of the audit service fees, so audit committee will have some impact on it. With reference to Xia Wenxian, there may be three possibilities of the Impact of the results. Firstly, it will increase audit fees. The audit committee members, in order to protect themselves from losses, may require the auditor to increase the scope of the audit, accordingly increase audit fees. Secondly, it will reduce audit fees. Its domestic duties of the audit committee require effective monitoring of financial information within the company, and then the strengthening of internal control would drive the auditor auditors to reduce audit coverage and reduce unnecessary levels of risk control, so that the audit costs will be reduced. Thirdly, there will be no effect on the condition that the above two effects will offset each other.Based on the above theoretical analysis, the relationship between the Audit Committee Characteristics and audit fees is analyzed starting from the characteristics of the Audit Committee. First, independence is the basic characteristic which the Audit Committee must have. As independent finance strength in the internal company, the independence is indispensable. For the characteristic of Audit Committee, this factor is especially essential. Based on this, the first supposition in this article is prepossessed:H1:the higher the Audit Committee’s independence is, the higher the audit expense will be. At the same time, it is lack of the advantageous evidence to manifests its independence from independent director’s proportion purely. Therefore, this article embarks from the independent director’s background. In spite that the independent director’s background can be divided into the university background, the practice background and the government background, this article is mainly concerned with the university background. Teacher is a pretty special profession, who mainly has conscientiousness to pursue science and authentic manner in the research findings. Based on this, the second supposition in this article is prepossessed: H2:the higher the proportion of Audit Committee’s independent director work in university is, the higher the audit expense will be. As a result of its particularity, the specialization is also a very important characteristic of the Audit Committee, which is independent finance strength. The specialization has not only very good effect on internal control’s enhancement, but also pretty well guarantee outward to the financial information quality. Based on the theoretical analysis above, the specialization possibly has positive, negative influence to the audit expense. Therefore, the third supposition in this article is prepossessed: H3:the Audit Committee’s specialization is influential to the audit expense. This article carries on analysis from the Audit Committee’s activity, which inspects if the committee has fulfilled its responsibility from its own angle. Therefore, the forth supposition in this article is prepossessed: H4:times of the Audit Committee’s meeting is influential to the audit expense.Besides the several characteristics above, the gender proportion is also studied in the Audit Committee, which has been researched overseas. Cater (2003) studies indicated that in the board of directors, the feminine population’s proportion may enhance the shareholder value. The overseas research once demonstrated that the female may enhance the enterprise achievement. Generally speaking, feminine risk less and are more discrete than male. As a result of these differences, there possibly will be positive or negative influence to the audit expense. Therefore the fifth supposition is proposed: H5:the feminine population’s proportion in the Audit Committee is influential to the audit expense. Besides the five explanatory variables above, joins three controlled variable are joined in this article:the company total assets, (stores goods+account receivable)/the total assets and if it is "the four big".The majority of listed companies in our country have already set up Audit Committee now, and only thus companies are studied, so the variable of yes or is no longer joined. The data of Shenzhen stock market A Shares in 2008-2009, totally 1212 data, is selected in the research. Removing the flaw data as well as companies in finance class, Panel data of 997 listed companies is finally obtained. EXCEL and the SPSS 13.0 software are mainly used in the data processing, which includes the maximum and minimum value rejection.Firstly the empirical results are descriptive counted, from which the influence of the establishment of the Audit Committee towards audit expense is simply analyzed. Through analysis of the 30 companies of the newly established Audit Committee in 2009 and compared with the average audit expense in 2008 and 2009, it shows that the set up of the Audit Committee makes company’s audit expense to increase. Simultaneously the other variables are also descriptive counted. Then relevant analysis to the explanatory variable is carried on, and it appears that the correlation coefficient between them is small.Regression analysis shows notable positive relationship between the audit committee’s independence and the audit fees, when the level is fewer than 10%, which is consistent with the assumption 1. The proportion of the independent director with college background has a notable positive relation with the audit costs when the level is fewer than 10%, which is consistent with the assumption 2. The relationship between the specialization of audit committee and the audit fees is obvious under 1% level, which testifies that professionalism influence internal control more than the requirements of external auditors, thus making the audit cost reduce. The activeness of audit committee meetings is related to the audit fees clearly under 5% level, and the symbol is positive, which is consistent with the assumption 4. The regression results concerning the proportion of female members show that its relationship with the audit fee is not significant. The reason might be that the positive and negative effect offset each other or that women have little action in this field.Based on the empirical study result in this paper and considering our country special system background, the following proposals are suggested:(1) consummate audit committee’s related system; (2) enhance the independence of the audit committee. Introduce more talented person with university background to be company’s independent director; (3) improve the audit committee member’s specialized quality; (4) strengthen the audit committee’s authority.The innovations of this paper are as follows:firstly, the relationship between the characteristics of the audit committee and audit fee is comprehensively studied. Secondly, the college background of the independent directors, which is a fresh perspective, is discussed. And the relationship between the characteristics of the audit committee and audit fee is studied using the proportion of the independent director working in universities. Thirdly, the gender of audit committee members is considered in this paper.However, in spite that relationship between the audit committee’s independence and the audit fees is comprehensively studied in this paper, there are still some shortages. Firstly, only the data of 08-09 is researched, which is only two years and is probably to make the result error. Secondly, other features of the audit committee are not considered, such as time of the establishment, the audit committee members’official performance, and so on. Thirdly, the model used is single and the research method is based on the previous model and has not many innovations. Fourthly, the background of independent directors is analyzed by college background only, which is not so comprehensive. Fifthly, the research on gender is not perfect enough. It might make good results if the education background of women is considered.In view of some weaknesses, I hope academics in our country could pay more attention to the research of the audit committee and some further research could carried on in the application and development of the audit committee system. Moreover, hoping that the area of study could be enlarged and research methods in this field could be updated. |
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