Correlation Study On The Effectiveness Of Internal Control And Audit Pricing

The process for CPAs to receive the corresponding remuneration from its customers by providing audit services is also the process of audit pricing, there are many factors that influence this process.Such as the business scale of company, the company’s financial risk and firm size and so on. Internal control is a reliable guarantee for the effective operation of the company, and it’s status and the degree of concern will become increasingly prominent. Correspondingly, CPAs will also pay more attention to the situation of the audited entity’s internal control when launched audit work. Currently,the correlation study between audit pricing and the effectiveness of internal control is not much in our country. Especially in the financial sector, there are no scholars carryied out a systematic research. In addition, Conclusions of the study on the correlation between audit pricing and the effectiveness of internal control different. In addition to the different methods of internal control evaluation, another important reason is that the overall quality of internal control is different in the study of different age.This paper study on the correlation between audit pricing and the effectiveness of internal control by adopting the combination of theory and empirical research method. In theoretical part, First introduced three theoretical basis of this study-agency theory, asymmetric information theory and game theory. Immediately afterward, based on a historical perspective, to investigate the interaction between the two from the evolution of internal control and audit model at different stages of development. On this basis, this paper has embarked the industry analysis and dynamic analysis:based on the different characteristics of the financial sector and non-financial sectors to selecte internal control deficiencies and the degree of achieving internal control objectives as the substitution variables the effectiveness of internal control;From a dynamic point of view, this paper conducted prediction and analysis of the trends of the correlation between audit pricing and the effectiveness of internal control. Empirical part, the correlation were carried out by descriptive statistical analysis, correlation analysis and regression analysis.Results of this study indicate that whether financial or non-financial sector industry, there is a negative correlation between audit pricing and the effectiveness of internal control. Specific performance for:in non-financial sectors, it was negative correlation between audit pricing and the degree of achieving the internal control objectives. And in financial sectors, it was positively correlated between audit pricing and internal control deficiencies. However, the significant average water varies in different years. This result is consistent with the assumptions mentioned in this article. This study made up the gaps in the research of financial industry, and explored the trends in correlation between audit pricing and the effectiveness of internal control. And in the final paper proposed policy recommendations aimed at improving audit pricing behavior, and audit pricing model.