Agency Costs And Audit Fee In Family Firm

Since the reform and opening, the rapid rise of non-public economy of our countryhas gradually become an indispensable important force in promoting China’s economicand social development. The third plenary session of18points out that:"the publicsector of the economy and the non-public sector of the economy are importantcomponents of the socialist market economy, and they are the important foundation ofChina’s economic and social development."It is fully affirmed the importance of thenon-public sectors of the economy in the foundation position in the economic and socialdevelopment in our country, and it is also fully embodied the party and the countryattaches great importance to non-public economy. In the non-public sectors of theeconomy of our country, along with the gradually deepening political affirmation andincreasingly wide range of social identity, family business is developing rapidly becomethe mainstream of Chinese private enterprises entrepreneurship.Agency costs between owners and managers have always been an inevitableproblem in enterprise management. To manage the enterprise as the owner of thegrantors and the trustee of the target appear deviation between professional managers.Owners and managers to pursue their own interests which leads to inconsistent goalorientation and the asymmetry of information, both from the agency conflict betweenowners and professional managers, causing the appearance of the agency cost. Thiskind of agency problems in family firm is also widespread, confrontation betweenGome’s largest shareholder Wong Kwong Yu and the professional manager Mr. Chen,is a typical family firm agency problem. Therefore, shareholders need to entrustindependent external auditors to audit and inspect management that provides financialinformation and financial reports of the authenticity and accuracy. So by doing this itcould ensure that their interests are not compromised. The management supervision andrestraint constitute the family enterprise external audit demand.For being audited, the audit fee is a spending, only when the audit producing thebenefits outweigh the auditees to pay for its cost, the audit act is an act of economicsignificance. For the listed family firms, whether through the audit activity can getrevenue, which is fully determined by the audit fee. Therefore, by reasonable ways toreduce the audit fee will be conducive to improve enterprise economic benefits from the audit activities.In this paper, based on literature review, theoretical analysis, assumptions, researchdesign, verify the hypothesis, the analysis method of conclusions and recommendations,the essay studies the influence that the agency costs of listed family firm make on auditfee from2008to2013in China through two aspects of theory and empirical research.First of all, this article conducts research from the perspective of theoretical research,and it carries on the induction summary research both at home and abroad about familyfirm definition, governance structure and agency problem, and it put forward the listedfamily firm generating mechanism of agency problems and then through the economicconsequences of earnings quality, and the influence factors of audit fee throughtheoretical analysis, assumptions. Then the paper determines the research sample,present listed family firms in China which were analyzed by using descriptive statisticsand the family listed firm between audit fee and agency costs, and the differencesbetween the degree of earnings management, etc. And through the correlation analysisand regression analysis hypothesis test is proposed.This paper has come to the following conclusions: The audit fee of family firm islower than the non-family firm; The agency costs and audit fee of family firm is positive;Compared with the non-family firm, the agency costs of family firm has a strongerimpact on the audit fee; In family firm, the earnings quality strengthens the agency costimpacting on audit fee.