The Correlation Of Internal Control Information Disclosure And Audit Fees

The services offered by CPAs is a kind of services which are complicated and professional. The cost and quality is difficult to quantify directly. Researches on audit fees has always been hot since Simunic first proposed the audit pricing model in 1980. Based on the full disclosure of Chinese listed companies’ audit fees, researches on audit fees started late in China in 2001. Since financial scandals in Enron and WorldCom have been broken out in 2001, problems about disclosure of internal control information has attracted widespread attention. American government constituted and issued SOX Act in 2002, implementing strict regulation on the disclosure of internal control. With the constant development of China’s securities market, disclosure of internal control is receiving more attention from Government regulators. In 2008, the ministry of Finance jointly with CSRC(China Securities Regulatory Commission), National Auditing Administration, CBRC(China Banking Regulatory Commission), CIRC(China Insurance Regulatory Commission) promulgated The Basic Norms of Internal Control. In 2010, they promulgated The Supporting Guidelines for Internal Control. Those two files represent the establishment of internal control evaluation system for listed companies in China.There are a plenty of researches on audit fees and disclosure of internal control. However, the internal control has not been considered during the research of audit fees by Chinese and overseas scholars, therefore, is audit fees affected by disclosure of internal control information? This paper is based on the new regulation rules, focusing on the disclosure of internal control information, start the further study on the influence factors of audit fees.This paper adopts normative research technique, reviews documents of audit fees and disclosure of internal control information and builds hypothesis according to the analysis of principal-agent theory, asymmetric information theory, signal transmission theory and risk oriented theory. This paper selected 2012-2014 real estate companies listed in Shanghai and Shenzhen as a sample, using STATA12.0 software to make empirical analysis. The results of this study show that, (1) Chinese listed companies which disclosed audit report of internal control paid less audit fees; (2) Chinese listed companies which disclosed internal control self-valuation report paid less audit fees; (3) There is no significant relationship between disclosure of internal control defects and audit fees; (4) Chinese listed companies which correct internal control defects paid less audit fees; (5) Chinese listed companies whose internal control system are more complex paid more audit fees. The conclusion of this paper provide empirical evidence for perfecting internal control evaluation system. It also provides guidance for establishing a rational standard of audit fee. In the end, this paper puts forward relevant policy advices according to the conclusions given above.