Research On The Association Between Validity Of Internal Control And Audit Pricing

The development of the audit industry contributes to maintaining the market economy order, improving the efficiency of information transmission and ensuring the effective allocation of market resources. Ensuring the independence and quality of auditing can promote the function of auditing. Analyzing audit pricing is the channel to studying and understanding quality and independence of audit. So the study of audit pricing has been the subject of great concern in the audit profession.Accelerate the research on audit pricing is a necessary requirement of market liberalization. Whether the audit pricing is normative has a great effect on the development of audit profession, and it is a challenge for firms and regulatory authorities. First, audit pricing and independence is closely related to the audit to cover the cost of audit in case of discounted quality, so to ensure the audit pricing is beneficial for both investors and market developments. Secondly, the audit pricing can reflect the competitive structure of the audit market and related factors of audit pricing. Audit pricing can also help to explore the formation of audit trends and forecasts the change of pricing. Thirdly, the specification of audit pricing is a prerequisite for the development of the audit profession. As the market continues to open and government intervention to reduce, the audit pricing will affect the development of the audit profession with becoming a decisive force. In summary, our study of audit pricing is an important way to find status and development in audit industry.Following the audit pricing model of Simunic, domestic and foreign scholars in the field of audit pricing continue to refine and make intensive study, including the general factors and specific factors. General factors include the size of assets, brand of accounting firm,asset-liability ratio and so on. Scholars had consistent findings in these areas,but there are some differences in terms of legal environment, governance of corporate, and accounting firm rotation. By learning the results of research scholars, the paper believe that the relationship between the effectiveness of audit risk and internal control is an inadequate research angle, so this paper examines the factors of audit pricing from the perspective of audit risk. In the risk-based audit mode, the internal control is an important measure to judge the audit risk, although the definition of audit risk is no longer confined to internal control risks, it gradually cover the whole environment of production and operation, internal control continues to occupy an important part of the audit risk due to the differences in the quality of auditors and the difficulty of measuring the operating risk.It is a more direct way to determine audit risk, so this paper locked sight in the effectiveness of internal control under the data openness and reliability.This paper hopes to get a more reliable conclusions to supply the study of factors influencing audit pricing.This paper adopt the Internal Control Index of the listing Corporation published by Dibo Risk Management Technology Co. Ltd., combining with the internal control system of rules and audit pricing model, analyze the relations between the effectiveness of internal control and audit pricing by normative research and positive research. In normative research, based on the deep pocket theory, cost-benefit theory, Insurance theory, we obtain that the effectiveness of internal controls and audit pricing have negative relation. Because of the special institutional background and economic development history, concentration degree of the audit industry market is low and competition is fierce, different size of the firm have different audit pricing mechanism, so based on this consideration, in exploring the internal control effectiveness on the influence of audit fees, this paper introduce size of accounting firm at the same time, to find the sensitive degree of the effectiveness of internal control and if the large firms pay more attention to internal control. The study found that within five years overall sample analysis, along with the listed company internal control index increased, audit fees decreased slightly, but in year by year analysis, correlation is not stable; with the improvement of internal control index, large firms significantly reduced the audit fees, compared with the small firms, large firms on the internal control risk is more sensitive. It probably due to large firms have better use of the risk oriented audit mode, after strive for high-quality customers, they use reasonable pricing mechanism to maintain high quality customers.Studying the relations between the effectiveness of internal control and audit pricing, we believe the result can analysis the influencing factors of audit pricing based on the actual situation of our country and provide reference for accounting firm to decide the price. At the same time, we can come up with ideas in strengthen internal control, accelerate the merger and reorganization of the accounting firms and strengthen the supervision to create a social environment conducive to the development of audit industry.