Analysis Of The Relationship Between Industry Characteristic And Audit Fees

With economic development, the number of listed companies increased and scales expand. At the same time, problems appear. Fraud cases of listed companies and audit failures of accounting firms, cause investors, creditors, governments and other stakeholders’ interests a huge infringement. These stakeholders, in order to safeguard their own interests, demand to know disclosure information of listed companies. Thus the content and quality have become increasingly demanded. Therefore, the quality of audits becomes very important. Reasonable audit fees are conducive to safeguarding the independence of accounting firms, thus ensuring audit quality; reasonable audit fees are conducive to attracting and gathering high quality audit professionals and ensure that certified accountants have professional competence, thus ensuring audit quality; reasonable audit fees to guarantee the completion of the necessary workload, thus ensuring audit quality. Audit fees are an economic link between certified public accountant and public company. On the one hand, it is strongly related to the competition of audit service supply-sides, on the other hand, it exhibits entrusting-sides’ paying ability. Audit fees have a very significant impact for audit quality. Therefore, the research on audit fees is necessary.Since the early eighties of the twentieth century, the U.S. scholars have done kinds of researches on the audit fees and have used stock market experience data to do the demonstration proof-test. The results not only help the stakeholders, but also enrich the audit theory. In2001, the United States securities regulators and regulations demanded that the U.S. listed companies disclose audit fees and promoted the development of empirical research. China Securities Regulatory Commissions promulgated some documents specifically requests the listed companies disclose auditing fees as an important matter in the annual reports. This behavior provide an condition for studying the audit fees empirically, and allow stakeholders to learn more about the useful information related decisions including auditing fees.Now the audit pricing formation was impacted by many internal factors in audit services market, for example, clients scale, risk, complexity, auditor scale and so on, which essential for studying audit fees. Common factors are also taken part in this paper. The audit fees were impact by many factors, except the factors state above, it markedly influenced by industry characteristic. But given the domestic and international research, we find out that papers study audit fees in terms of industry characteristic perspective is less than other micro perspective. This paper based on the system background and theoretical analysis of industry characteristic and audit pricing, selecting relative data from2003to2010, introducing IOS, using descriptive statistic and multiple regression model to test the correlation between industry homogeneity and audit fees. This because the industry homogeneity product scale effect, then the cost of accounting firms’ single audit clients is reduced, audit pricing also reduced.This paper divides the sample into two groups by the nature of controlling shareholder, then test groups independently. The results are:in the state-controlled listed companies, the industry homogeneity and audit fees’negative correlational dependence is significant. In other companies, the negative correlational dependence is not significant. For the requirements of our research, we study the state-controlled listed companies alone, finding out in these companies, the lower level of industry expertise, and the more marked negative correlation between industry homogeneity and audit fees.According to the conclusions, we can improve our understanding of the audit pricing model, so as to strengthen the supervision of audit fees. Difference industries have difference audit fees. Industrial characteristic as the new component of corporate governance mechanisms, it has an important influence the audit pricing. When make investment or regulatory decisions, stakeholders and the SFC should consider the specific times and various industries seriously. According to the concrete conditions, accounting firms should fully consider the impact of industry to determine the audit price, and develop different prices based on a specific period of time in China.