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An Empirical Research On Integrated Audit, Audit Fees And Audit Quality

Posted on:2015-02-06Degree:MasterType:Thesis
Country:ChinaCandidate:C C XuFull Text:PDF
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In recent years, Enron, World Com, Xerox and other world-renowned companies’successive exposure financial fraud cases, making people generally questioned whether theaudit of financial statements is a strong guarantee for the quality of financial reporting. Thecommon feature of these financial scandals is completely undermined investor confidence inthe capital markets, but also exposed the root causes of financial scandals such as these aregenerated by the existence of significant internal control deficiencies. In view of this, theimportance of internal control audit has become increasingly prominent and thus exacerbatedthe regulatory agencies to establish a sound internal control audit related to the pace of thelegal system.July2002, the U.S. Congress and the government promulgated the “Sarbanes-OxleyAct”(referred to as SOX Act), the bill will be listed on the Company’s internal control auditraised to the height of the rule of law. Since then, the U.S. Public Company AccountingOversight Board (PCAOB), respectively, in March2004and in May2007issued the AuditingStandards No.2(referred to as AS2) and No.5Auditing Standards (referred to as AS5), inorder to constantly improve the execution of the Act problems encountered. AS5auditingstandards require the external auditor to perform internal control audit using a top-downrisk-based audit approach, and proposed the concept of an integrated audit for the first time,that means financial statement audit and internal control audit performed by the sameaccounting firm. On the basis of drawing on the SOX Act, in May2008of the Ministry ofFinance and other ministries jointly issued “Basic Standards for Enterprise Internal Control”,and in April2010released “Enterprise Internal Control Audit Guidelines” in the proposedintegrated audit Article concept. The CICPA in the “Guidelines on the implementation ofenterprise internal control audit opinion” informed that: the integration of the internal controlaudit and financial statement audit can improve audit efficiency. The relevant standard-setterspay more attention about the integration of the two audits. In practice, more and morecompanies choose to perform integrated audits. So, could the integrated audit really reduceaudit costs? And will reduce audit quality?In this paper, we choose268listed companies as samples.These companies haveimplemented internal control audit in2012and the audit fee have changed. We examined theimpact of the integration of financial statements audit and internal control audit. We found that:1.the implementation of an integrated audit will indeed reduce audit fees, but thisreduction occurs only in the financial statement audit fees, and exists only in themanufacturing sector;2. among the companies which have implemented an integrated audit,company characteristics will impact audit fees;3. the implementation of an integrated auditwill reduce financial statements audit fees but not reduce audit quality. Finally, we putforward some proposals, for example, the regulatory authorities should monitor and promotethe full implementation of an integrated audit of listed companies and listed companies shouldcontinue to improve its internal control system.
Keywords/Search Tags:Internal control audit, Financial statements audit, Integrated audit, Audit fees, Audit quality
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