Research On The Association Between Defect Of Internal Control And Its Modification To Internal Auditing Fees

At beginning of this century, United States exposed the WorldCom, Enron and other accounting scandals, which indicated that the failure of the capital market regulatory severely undermined the credibility of financial statements of listed companies, Investors gradually realize that solely rely on listed companies disclosure financial statements that audited CPA is not enough. In this context, internal controls as a mechanism which can ensure the financial statements to be sure and complete, so to audit whether it is effective is particularly important.In 2002 the US Congress and the government enacted the SOX Act, which required listed companies must appoint CPA audit internal control self-assessment report signed by managers, and disclose the audit reports. In 2008 the ministry of finance and other five ministries jointly issued " enterprise internal control basic norms " which requested all main board listed companies must take assessment of the effectiveness of the internal control and disclose the self assessment report. In 2011 the ministry of finance and other five ministries jointly issued "the enterprise internal control audit guidelines" which requested all main board listed companies must engage auditors to audit the internal control and report the audit opinion. Because of some listed companies disclosed internal control audit costs, which provides condition to Chinese scholars to study it. Audit the internal control as a paid service, which hires CPA to audit must pay the costs, we call the costs as internal control audit costs. This text stands CPA’s point of view to check if company has internal control weaknesses whether it has impact on the internal control audit costs, what is more, whether different internal control weaknesses has different rectifications to internal control audit costs, which require further test.Firstly, we reviewed of the literature, our research found that currently the study of internal control audit costs remained in its influencing factors, deficiencies internal control to internal control audit costs research is not related, which leaves an opportunity for this article study. Secondly, on the part of theoretical analysis.Thus we have reasonable expectation there have relationship between deficiencies in internal control and audit fees. Then, in the empirical part we choose manufacturing which is the most high degree of competition as our research sample, the 1111 datas we select 2013 and 2014 two years, The regression results indicate that there have a positively related between deficiencies in internal control and internal control audit costs; compared with the general internal control deficiencies, specific deficiencies in internal control have greater impact on the internal control audit fees; if the internal control deficiencies are corrected, the internal control audit costs will reduce. Finally, to ensure the results of this study is reliable, in this paper, three assumptions were made robustness test, the test results are basically the same. Finally, according to research conclusions, we suggest listed companies should actively establish a good internal control system, if there has internal control deficiencies must be timely remedied; CPA should adopt the principle of risk-based to audit internal control, and do more work on the specific defects, internal audit fees should not simply based on the cost, CPA should charge more if the list company have more audit risk, Otherwise, will give listed companies wrong guiding; regulatory conclusions of this study can aid to perceived deficiencies in internal control are disclosed market reaction caused by the theme, provide the basis for building a reasonable audit market and develop in line with national conditions and regulatory system. Regulatory authorities can rely on our research conclusions to perceived deficiencies in internal control disclosed which caused the market reaction. To provide a basis for building a reasonable audit market and develop regulatory system which is meets our national conditions.