The Empirical Research Of Risk Compensation Influencing On Certified Public Accountants’ Audit Pricing

Since the global financial crisis in2008, The voice of accountability "Big four" often been made public. Some statistics shows that, by July of2011, at least24cases caused by the subprime financial crisis, the "Big four" stood on the dock in class action law suits. In our country, The financial fraud exposure of Lantian, Amoi electronic shares, Warren and Tianjian and some domestic well-known accountant firms were fined high joint responsibility for compensation. Civil compensation also has become China’s accounting firms’significant problems. This happened for the background that, at home and abroad as the audit failure case the certified public accountants were fined high civil litigation risk compensation, investigating whether CPA have adequately considered legal risk when audit pricing., and in order to understand what key factors influence the audit pricing in our country.This paper bases on audit insurance theory, agency theory and the theory of the signals, when CPA assess risk, two kinds of risk must be considered:the first is inherent risk factors, Which contain internal control quality and surplus management risk. And the surplus management risk is divided into manipulating surplus management risk and the brand of earnings management risk. The second is external risk performance, including equity characteristics, financial risk and operational risk, etc. And then, this paper selects related indicators to establish audit pricing regression model. Also the manufacturing industry listed companies are the research objects in SSE in2010. After the multiple linear regression examine, it concludes that internal control risk, manipulating surplus management risk, the brand of earnings management risk are related to audit pricing. In additional that, equity characteristics, Z-score which reflects of the financial risk, debt-to-assets ratio all pass the significant inspection, and are consistent with the hypothesis. But the audit report opinion last year, return on equity, operating risk can not pass the inspection. From the empirical results above it sees that, The CPA really consider the litigation risk factors when pricing, risk compensation does exist in practice, but not all the risk factors are included. Therefore, CPA risk awareness remains to be further improved.