Does Price Regulation Enhance The Audit Quality?

As a monitoring mechanism, independent audit can ensure the credibility of public companies’accounting information, reduce information risk, protect the interests of financial statements users.In our country, audit service is mandatory service, reasonable price formation mechanism through market competition does not exist, so price competition behavior exists. The interests are different between mandatory audit service’s consumers and offers, consumers want the lower price. In China’s audit market, accounting firms are with larger quantity but smaller scale, market positioning and service present homogeneity, price competition within the industry has been common. But too few audit fee isn’t able to support sufficient audit procedures to adequate audit evidence, therefore the auditor independence and audit quality are compromised.By reading the relevant literature, we found that the existing paper for the phenomenon of the low price competition of our audit service and price regulation, were lack of detailed research. In research method, the domestic scholars mainly focus on the relationship between audit fees and audit quality, abnormal audit fees and audit quality and so on, for the low price competition and price regulation are mainly studied in theoretical research methods. Based on previous literature, this paper studied research combined with the problem of price regulation on the audit market in China by the methods of standardized research and empirical. The first production status of theoretical research on audit quality and low price competition, price controls are summarized and analyzed, and then uses the standard research method described the mechanism of price regulation on audit quality, with2005-2012years in listing Corporation for the study sample, using the research methods of descriptive statistics and regression analysis of empirical research, the conclusion of the study found that:In China’s audit market, the low price competition behavior will cause damage to the audit quality, the price competition behavior of price control measures will improve the quality of audit.Content of this article is divided into six parts: The first part is the introduction, the study described the background and on the basis of combing the literature, this study put forward ideas, methods and innovations.The second part is literature review. This section described from five aspects: firstly, summarized audit quality and independence of audit quality measure; secondly, studied the impact of industry on the audit market to moderate on audit quality; thirdly, recalled the low price-competitive behavior affection on audit quality; fourthly, studied the effects of price regulation on audit quality; finally, reviewed and analyzed these literatures.The third part is the theoretical analysis. First, stated the theoretical basis of price controls, audit quality, then theoretically analyzed the price control mechanism in the low competitiveness of enterprises in the role.The fourth part is the study design. This section proposed hypotheses based on theoretical analysis firstly. Then defined the conception of low-cost competition, screened non-financial public companies between2005-2012based on the above definition, excluding missing data samples, elected price competition businesses, and paired these samples approach to1:2ratio, and finally introduce the model design and lay the foundation for the next part of empirical research.The fifth part is empirical research. This section used the R statistical software to analyze the third part of the selected data empirically. Then interpreted and analyzed the results of empirical analysis.The last part is the conclusion and enlightenment. This section first summarized the findings based on empirical research conclusions, and made recommendations from audit report users, providers, regulatory agencies. Finally, concluded the limitations of this study.