The Empirical Research On The Relationship Between Audit Fees And Audit Quality Of Listed Company

In recent years, with the rapid development of securities market in China, various financial cases of fraud and failure occur frequently, which makes investors request higher disclosure quality of acounting information. As an independent third party, auditing of CPA is placed a relatively high expectation. High audit quality helps to imporove the quality of listed company’s accounting information disclosure, reduce information asymmerty and agent cost. Generally, the audit fees between accounting firms and listed companies should follow the principle of transparancy, reseanability and marketization; and the value of audit services should be matched with its price. However, the audit fees in China does not follow the law of market competition in some extent, with much vicious competation and abnormal audit fees widespread. After the CSRS requested that all listed companies should disclose the amount of audit fees in the important items of the annual financial report, whether the audit fees of listed companies reseanabally reflect the audit quality has caught extensive attention among domestic scholars. Most scholars only studied the relationship between the actual total sample audit fees or abnormal audit fees and the audit quality. But few conduct segmentation study on the abnormal high or abnormal low audit fees, and rarely do they involve in research of the degree of abnormal degree of audit fees to the audit quality.Based on the related literature review at home and abroad, and theoriotical analysis, we chosed 6869 listed companies as the research sample of this paper, from all the A-share listed companies in the stock market of Shanghai and Shenzhen in 2012-2014. Firstly, we selectd replacement for audit quality--absolute value of accruals profits, estimated it with the modified section of Jones model. Secondly, we built the audit pricing model to forecast the nomal value of audit fees, and took the difference between the actual value and the normal audit fees as abnormal audit fees. Thirdly, established the empirical model from overall sample and abnormal audit fees, based on the descriptive statistics and sample correction analysis, which clarifies the relationship among the actual value of audit fees, positive abnormal value, negative abnormal value and audit quality. Finally, put forward relevant suggestions based on the empirical research result, the limitations and directions of future research.The results show that:Firstly, The actual value of audit fees is consistant with the audit quality, but not so obvious. This may caused by the incomplete development of audit market in China. Because there is not a national unified standard of audit fees pricing, which results in the relatively chaotic phonomenon of the actual audit value in listed company’s annual report. Secondly, There is a widespread abnormal value in the audit fees, which is disclosed in the annual report of listed companies, and the abnormal low audit fees are more prominent. Thirdly,25% can be used as a threshold to measure abnormal audit fees whether damage audit quality. Whatever the audit fees higher or lower than its normal value by 25%, which will damage the audit quality. Therefore, the damage of the "audit opinion shopping" or "excessive pursuit of low price audit" to audit quality cannot be neglected. The innovation of this paper is reflected in:We standed on the position of listed companies, used the "Dividing range and stage" approach to make segmentation research rather than the traditional overall sample research, and the conclusions and recommendations of this paper are more credible and targeted. In a word, this paper defined the range of normal and abnormal audit fees value, which will enrich and promote the existing research results, and provide some strong references for the practical work of government to establish audit pricing systems and standards.