Empirical Study Of ERP System Implementation,Agency Cost, And Audit Fees

With the development and innovation of enterprise information process, IT governance becomes more and more important in company. And as the largest investment project of the enterprise IT governance, ERP (Enterprise Resource Planning) system has been received wide recognition and promotion in the listed companies of our country. We have discussed the correlation between ERP system implementation and audit fees based on agency costs of company in this paper, in order to provide valuable contributions to the development of theoretical research on audit fees in this area.This paper is based on the principal-agent theory, after the review of some relative literatures in China and abroad, we analyzed the theories of the relationship between the ERP system implementation and audit fees, which support that the implementation of ERP system affects audit fees of company by the two ways. One way is direct impact, and this impact has two mutually balance of power:a decreased reflection of audit fees by reducing the auditors’workload, with an increased reflection of audit fees by improving the risk of audit. The other way is indirect impact, which causes the reducing of internal agency costs through the implementation of ERP system, and then decreasing the audit fees.In the following, we select the listed companies which implemented ERP system on the Shenzhen Stock Exchange and Shanghai Stock Exchange as research samples, using the Wilcoxon rank test and multivariate linear regression model to investigate the relationship between ERP system implementation, agency costs and the audit fees. And the results of this article are mainly influential in the following:Firstly, we found that the companies with ERP system have no significant difference of audit fees between the previous year implementation and the first year. But when we expanded the sample period, the companies implementing ERP system have a significant correlation with the audit fees, and this result partially confirmed our theoretical analysis. Secondly, the empirical results show that the implementation of ERP system in our country has "lag effect". The longer time the ERP system implements, the better effect on the audit fees. In addition, this "lag effect" will continue for three years. Thirdly, research in this article found that the agency costs have positive impact on the relationship of "ERP implementation—audit fees". When the company implements ERP system, as the agency costs decrease, the audit fees of the company will decrease significantly, and this is consistent with our hypothesis.Over all, this study is based on the background of ERP system implementation, and also considering a variety of factors which affecting audit fees, so this paper is an extension of traditional theoretical study of audit fees. At the same time, the empirical results also providing a theoretical support for the stakeholders making relevant decisions. Therefore, the results of this article have a positive significance both in future research and management practices.