Study On The Impact Of The Internal Control To The Audit Pricing

In theory, the audit pricing is mainly affected by the audit cost and the audit risk. As atool to prevent the risk and fraud, the quality of the internal control directly affects the CPA’sjudgment to the audit risk and the cost input, finally affecting the audit pricing. Some scolarshave alredy make study on the correlation between the internal control quality and auditpricing, but few bits. So it is necessary for us to study further.This paper is going to study the impact of the internal control quality on the audit pricingby using the evaluation of internal control quality as a breakthrough.Firstly,it build an internalcontrol evaluation system based on the internal control objectives, which is used to calculatethe score to evaluate the internal control quality. Then built a multiple regression model, inwhich including the dependent variable, audit pricing, the independent variable, the quality ofinternal control, and six control variables, the clients’ asset size, business complexity,inventories and accounts receivable proportion of total assets, the firm scale and brand of theCPA, and the audit opinions. Finally, select984listed companies of A-share of the Shanghaiand Shenzhen stock market in2010-2011as samples for empirical research.The empirical result shows that: the internal control quality has negative correlation withaudit pricing, but not obvious.After analysis,the reason of the nonsiganificant negativecorrelation is that, the whole level of the internal control of the companies in China isrelatively weak, which leading to the internal control has not yet become the favorable tool tothe CPA audit. This conclusion is consistent with our current reality as well. There are twoadditional conclutions: the asset size of the clients, the business complexity, and the firm sizeand brand of the CPA are still the important factors to audit pricing; the accounts receivableand inventories proportion of total assets, and audit opinion type have nonsignificantcorrelation with the audit pricing.Finally, accord to the empirical results, the paper proposed three suggestions,strengthening internal control, strengthening external supervision and attaching theimportance of the internal control in audit.