Litigation Risk On Listed Company、the Quality Of Inter Control And Audit Fees

Auditing service is a kind of special commodity, the audit fees reflects its price. Audit fees will affect the quality of auditing and the independence of the Certified Public Accountant. If audit fees are too low, the CPA may not carry out more audit procedures to obtain ample, proper audit evidence, which will lead to poor audit quality; if audit fees are too high, it will affect the independence of CPA, and even involve in the purchase of "clean" audit opinion behavior. Audit fees are influenced by audit risk and audit cost, while audit risk and audit cost are influenced by the quality of inter control. Based on the cost benefit theory and the signal transmission theory, the CPA can rely on the inter control and reduce the audit procedure if the inter control is effective, and also it will reduce the audit fees; based on the insurance theory, deep pocket theory and the audit risk theory, the effective inter control also reduce the CPA’s audit risk.Litigation risk is one of the most important risk that enterprise come across in operating, and it can affect the audit cost and audit risk at the same time, thereby affect the audit fee. It deserves a further research on the impact of litigation risk on the relationship between the inter control and audit fees under the risk-oriented audit model.Based on the data of Chinese A-share listed companies from 2010-2014,this paper study the relationship between the quality of inter control and audit fees, and introduce litigation risk on listed company to study its effects on the relationship between the quality of inter control and audit fees. The empirical results suggest that there is a significant negative correlation between internal control and audit fees, and inter control and external audit can substitute for each other, while the negative correlation between the quality of inter control and auditing pricing weakened after we introduce litigation risk into our research. The research result shows that the CPA will revise the judgment of audit risk based on the information of litigation. Further research results show that the macro legal environment has no significant effect on the relationship between the quality of internal control and audit fees.