Political Association, Abnormal Audit Fees And Audit Opinion Correlation

Abnormal audit fees reflected the assessed audit risk of the customer by the CPA, which will affect the type of audit opinion, while political association will have an impact on audit opinions.In this paper, We have been tested the three relations by2010-2014 China’s Shenzhen and Shanghai A-share listed companies in the private data. We used the research method of the combination of theoretical analysis and empirical testing. Firstly, We reviewed a literature through the risk premium, the relationship between abnormal audit fees and audit opinion, definition of political association and the affection on companies, the relationship between political association and audit opinions, We followed summarized the principal-agent theory, the audit-related demand theory, the risk premium theory, rent-seeking theory, and then on the basis of theoretical analysis, this paper proposes the research hypotheses, and finally through empirical methods to test whether their hypothesis is correct. In the empirical aspects: First, regress the normal audit costs model to get ie, named as abnormal audit fees, followed tested the impact of abnormal audit fees on audit opinions the by the establishment of Logistic Model, as well as the impact of actual control of political association, political association level on the type of audit opinions.The results showed that: the higher the positive abnormal audit fees, the more easily lead to non-standard audit opinions issued; the actual controller’s political association of private enterprises will affect the relationship between abnormal audit fees and audit opinion types; political level also have some impact on the type of audit opinion issued by accountants.These results indicate that, in the case of absence of political association, positive abnormal audit fees reflects CPA risk assessment of material misstatement in the audit process and therefore the efforts, costs due to higher abnormal audit fees, the representative misstatement of the financial statements themselves more questions, so it will increase the likelihood of Certified Public accountants issued non-standard audit opinion. However, when the management of the audited entity with a government background, the CPA will be subject to political pressure from political association brings, then the probability of standard audit opinions issued will increase, accounting treatment associated with damage to the registered accountant independence and political background of the more powerful, the more taboo CPA rights and pressure on its hands.Therefore, we made the following suggestions: Encourage accounting firms introduce the audit risk premium model in the case of independence and fair. Government regulators should pay special attention to private listed companies with a political background, and pay attention to the reliability of the standard audit opinion. Learn from the experience of the stock market in western developed countries to reduce transaction behavior of enterprises and government in the institutional arrangements.