Research On The Influence From Earning Management To Audit Fee-Evidence From Listed Company

Audit pricing could be observed as a reflection of the relationship between supply & demand in audit market. Audit pricing will have effect not only on the independence of auditors, but also the quality of audit, and even the development process of the audit-fee-marketization. With the development of our stock market, all the stakeholders, such as investors, creditors, and regulators, are making more requirements on the quality of the information disclosure of the listed companies. The independent good audit service from certified public accountant could enhance the credibility of financial report, which is important to the protection of investors and the regulation of government.After the research on normal influence factors, scholars have started investigating specific factors, and even some potential factors. Because of acknowledgement of risk-oriented auditing, earning management has become an important part of those potential factors. Based on prior research and theory, this paper mainly uses method of empirical research to analyze the influence from earning management to audit pricing in China, with section data at the end of 2009, from listed companies in Shanghai & Shenzhen securities exchanges. The audit-pricing-model we use is improved from previous one, with a consideration of the reality of China. Since most earning management in China were operated through below-the-line items, this paper uses the result of the absolute value of nonrecurring items (disclosed in annual report) divided by year-end total assets as the substitution variables of earning management. With help of SPSS, we did multiple regression analysis with the model and found out that earning management has a great positive influence on audit pricing. To find out whether this influence has effect on the independence of audit or not, we added auditing opinion type as a factor into the first model, and got a result that the higher the audit fee is, the higher the possibility for audited company to be issued modified auditing opinion will be. Therefore, we come to a conclusion that the positive influence from earning management to audit pricing mainly is a result of improvement from audit quality, but not the purchasing behavior of auditing opinion as most previous research considered. At the end of this paper, there are some advises based on this research result.This paper has successfully proved the great positive influence from earning management to audit pricing, and testified that this positive influence comes from the improvement of audit quality, and does not have great effect on the independence of audit. There are still some shortages in this paper, such as without consideration about the influence from different orientations of earning management to audit pricing, and some other important factors. All those factors were left to be investigated in further research.