The Research On The Relationship Between Abnormal Audit Fee And Audit Quality

The quality of the audit report is directly related to the interests of the investors, and with theconstant improvements of China’s capital market laws and regulations, the audit market is also graduallystandardized. But that the Xindadi, Wanfu Biotechnology and other financial fraud cases frequentlyappearing, have been also exposed the audit market in China still exist many problems, and the auditquality varies greatly. What’s the reason? On the one hand, due to the CSRS (China securities regulatorycommission) requires companies must provide an unqualified audit report for IPO, RS(rights issues) andSPO (secondary public offering). Some companies who can’t meet the requirements will take risks to makefinancial fraud and buy expensive audit opinion, causing a drop in the quality of audit; On the anotherhand，with more and more the domestic accounting firms and CPAs appearing, fierce competition arisesbetween them, so some firms have to take low-price strategy to attract customers. In order to reduce costs,they reduce audit procedures and staffing, making audit quality cannot get guaranteed. Therefore too highor too low audit fees are likely to harm the audit quality. At this point, this paper will research therelationship between the abnormal audit fees and audit quality.The GEM (gem enterprise market) in China began in2009, after the new "Accounting Law"enacted, and the CSRC is also specifically formulated series of laws and regulations for the growthenterprise market, such as the “initial public offering and listing on the GEM management interimmeasures” which have put forward higher requirements for financial audits. Here, this paper take the GMRas the research object, and mainly choose2011and2012years of data for researching. The previous similarstudies take more attention to the main board market, whether the conclusion of the main board market isalso suitable for GEM? Whether the GEM is consistent with the main board or has its own characteristics?This article will demonstrate the analysis of these issues.We put forward assumptions respectively based on the perspective of fraud and cost-benefitperspective: assuming1, the positive abnormal audit fees and audit quality is negatively correlated;Hypothesis2, negative abnormal audit fees and audit quality is positive correlation. In terms of empiricaldesign, we use DA (discretionary accruals) as a substitute for the variable of audit quality, and construct the audit fee model under normal circumstances, then use the actual audit fee to calculate abnormal audit fees,and build a model between abnormal audit fees and audit quality by adding factors such as the asset scale,asset returns, asset-liability ratio, whether for four as control variables, and last use regression analysis toverify. After analysis, we found that assuming1was established, namely "positive abnormal audit fees isnegatively related to the audit quality", so we believe the situation with a high-priced purchase of auditopinion still exist in the capital market; But hypothesis2is not fully verified, that is a positive correlationexists between negative abnormal audit fees and audit quality, but the significance is not obvious. We thinkthe main reasons are as follows:(1) the improvement of the audit authority’s execution level, has been ableto provide high quality and low price audit services;(2) the book audit fee is lower than the real cost, socompanies and firms may conduct private transactions;(3) the open time of the GRM is shorter, so thesample data is fewer, which could also result in no significant.Finally, according to research results, this paper put forward a number of recommendations andcountermeasures, hoping to be helpful to build a reliable, effective audit market and better play its role.Hopefully this article can provide some enlightenment for research scholars about researching abnormalaudit fees and audit quality.