Study On The Impact Of Client-Specific Investment Opportunity Sets On Specialist Premiums

With the continuous development of the capital market and the social economy, the separation of ownership and management rights has led to a series of agency problems and information asymmetry between the owners and managers. In today’s social economy, audit as an external independent supervision mechanism, play a more and more important role in effectively alleviating the agency conflicts and information asymmetry in enterprises.Ministry of Finance issued a new auditing standards on February 2006, that means our country has established a modern risk-based audit mode.Since 2007, the AICPA have released a number of policy measures to support and encourage auditors to form industry specialization, improve professional competence, and enhance their competitiveness. In the real, the auditors also has realized the importance of the development of industry specialization, and actively develop auditor industry specialization.So study the audit industry specialization both in theory or practice field is necessary.Therefore, the importance of the audit industry expertise is gradually reflected.Investment opportunities represent a company’s investment or the choosing right of growth opportunities, and the choosing right is determined by the manager’s subjective judgment, so these options are full of uncertainty. Therefore, higher investment opportunities of the company also has a greater uncertainty,but also brings a higher risk of control and audit risk.Compared to the shareholders, the company managers are more likely to know more.About the investment opportunity and the information of the future value, which can produce a proxy problem. It requires managers to make decisions in an uncertain environment in the company with the high investment opportunity, which leads the behavior of managers more difficult to observe.External audit as an effective supervision mechanism can solve the principal-agent problem, effectively alleviate the problem of agency conflicts and asymmetric information between enterprise owners and managers. Therefore, the relationship between investment opportunities and external audit is also greatly significant.This paper takes the concept of enterprise investment opportunity as the breakthrough point, and studies the impact of enterprise specific investment opportunity sets on audit fee specialist premiums,In this paper, we select the data of China’s listing on the Shanghai and Shenzhen stock markets of 2011-2014 A-share companies by regression analysis, and uses multiple regression models to examine the impact of customer specific investment opportunity sets on the cost premium of industry expertise.The result of the model shows that firms with audit industry specialization gain the audit premium.Due to the audit fee drops by comparing the scale economies caused by audit specialty and the reduction of cost, audit firms in China are more embodied in the rise of audit fees specialized by industry investment and service differentiation etc.Therefore, the auditor industry specialization obtain the audit premium.But when the company specific investment opportunity set is high, expertise in the field of expertise and sills and other professional knowledge can not be fully applicable, which result in the audit fee premium relatively low.At last, this paper combining the empirical research conclusion and the reality of China’s audit market, puts forward some relative suggestions.Industry specialization strategy is an effective way for firms to become bigger and stronger, in the process of the implementation of the strategy, in addition to considering its own resource condition, but also consider the firm specific investment opportunity set to the firm and the effects. The audit industry need to recognize the importance of corporate governance by the firm-specific investment opportunity sets, and firms have to enhance their business capacity, update the industry specific and firm specific knowledge, and make audit work more rigorous and objective, in order to advance the cause of audit.