An Study On The Effect Of The Executive Characteristics On The Audit Fees

As financial fraud springing up, the public pay an increasing attention to the the listed companies’ information quality and transparency. Therefore, listed companies have made much effort to prevent the occurrence of financial fraud, among them, the most important and effective solutions are making nice corporate governance and the high quality audit service. Perfect and sound the corporate governance mechanism can reduce the financial fraud of listed companies from the internal, which is the most fundamental way to avoid financial fraud. High quality external audition, as an independent third party, accept the trust of the shareholders and supervise the executives, which can reduce financial fraud risk from the outside. The applied new auditing standards and the Enterprise Internal Control Basic Norms of Successive Implementation suggest the efforts of our country draw more attention to the high quality external audition and the internal corporate governance. Company executives are closely linked with internal control’s establishment, implementation, supervision and execution, which directly affect the quality of corporate governance structure. As the external supervision and audit service, is any relationship between it and company executives? For the empirical research in this field at home is relatively short of, so this paper selected the executive characteristics of relevant variables, from the perspective of the empirical, studying its correlation with audit fees. On one hand, these methods can enrich the related factors of audit fees and open up a new research direction for the future research on the audit fees’ influential factors. On the other hand, they can supply some countermeasures and suggestions for optimizing the listed companies’governance structure,such as recruitment, selection and training of high quality management personnel, improvement of the executive incentive system, including reasonable compensation contracts and equity incentive plans, etc. What’s more, this paper provide new ideas for standardizing the audit charge market.The paper is based on the reviewing of the corporate governance theory, the audit risk theory and audit fees theory, analyzing the influence of characteristic of executives on audit fees in-depth. Finally, this article use the perspective of audit risk concept to analyze the relation between executive characteristics and audit fees. Using the the chairman and general manager of the two posts into one, the number of the executives, the proportion of the executives’ share-holding, the executive compensation, the average age of the executives as the variables, to describe the executive characteristics. Other variables that effect the audit fees are used as control variables to study the executive characteristics’ impact on audit fees. This paper selected 1047 A-share listed companies of Shanghai stock market in 2010-2012 as a sample for empirical research. Variables descriptive statistic,single-variable analysis and multiple linear regression methods are used to study the executive characteristics’ impact on audit fees.First of all, the empirical test the effect of the chairman & general manager of the two posts into one with audit fees. The study found that stake of the chairman & general manager of the two posts into one has positive correlation with audit fees, which can see that the chairman & general manager of the two posts into one is not favor of the board’ independence and supervision, the risk of the executives fraud will increase, therefore the certified public accountants audit risk will increase, which will lead to the audit fee rises.Second, the empirical test effect of the executive compensation on audit fees. The study has found that the number of the executives and the executive compensation have negative correlation with audit fees.Third,the empirical test the influence of the average age of the executives on audit fees, The study found that the age has negative correlation with audit fees.But the proportion of share-holding of the executive has no significant correlation with audit fees.Finally, based on the foregoing findings, this paper proposes policy advice:listed companies should make reasonable leadership and supervision constitute, strengthening the independence of the board directors and stablishing highly effective executive incentive mechanism so as to further perfect the corporate governance mechanism, the listed companies should enhance the risk awareness and strengthen the communication between the executive and certified public accountants.