The Research On The Relationship Between Abnormal Audit Fee And Audit Quality

The relationship of audit arises from the agency problem between the principal and the agent in the principal-agent relationship.The essence of audit is to evaluate the performance of the manager.In the normal principal-agent relationship in auditing,the certified public accountant is employed by the principal as an independent third party,whose duty is to supervise the work of the agent and sign the audit opinion.In fact,there are so many scattered stakeholders of the company,the audit report yet has the properties of public goods,and the actual principal in the principal-agent relationship of auditing is hardly exists.Therefore,the manager is the one who was audited,at the same time,also the one who assumed the audit fee.It seems likely that the manager would pressure the accountant for his own interests.What's more,considering the bad influence of non-standard opinions,the manager has strong motivation to purchase better opinions.In addition,because of the low concentration and intense competition of auditing market,accounting office always has low negotiation ability when negotiating with listed company.What's more,the legal system in China is still no perfect,which means the legal risk of accounting office is relatively low.Therefore,the accountant is likely to be compromised by the requirements that the listed company suggests.Audit fee connects listed company and accounting office,so that the compromise on audit quality will reflect in audit fee to some extent,especially in abnormal audit fee.This paper divides audit fee into normal fee and abnormal fee and analyses the relationship between abnormal fee and audit quality.China's relevant laws and regulations on audit fee mainly highlight the minimum price guiding,but not exist on the phenomenon of audit purchase.Therefore,this paper analyses the relationship of abnormal audit fee and audit quality by dividing the abnormal audit fee into positive and negative.Positive abnormal audit fee means that actual audit fee is higher than normal fee,and negative abnormal audit fee means that actual audit fee is lower than normal fee.This paper has an evaluation of abnormal audit fee by using ratio method and discretionary accruals on the basis of the adjusted Jones model with the data of A-share listed company in year 2008-2015,and then tests the relation between abnormal audit fee and audit quality.The result shows that abnormal audit fee,no matter positive of negative,would damage audit quality.On the one hand,the higher abnormal audit fee perhaps means CPA has lost their independence and accepted the company's purchasing requirement;on the other hand,the lower abnormal audit fee may explain the price competition in audit market and the procedure reducing the office made for ensuring the benefits.This result shows that abnormal audit fee has a function of signal to audit quality,which means,abnormal audit fee can be used as an observable index to judge audit quality to some extent.In addition,considering the reforming of accounting office in China since 2007,this paper examines the moderating effect of firm organization form on the correlation between abnormal audit fee and audit quality.Because of the un-synchronism of the offices' transformation,this paper drops the samples during year 2010-2013.The result shows that the Limited Liability Partnership weakens the negative effect of abnormal audit fee on audit quality.This conclusion shows that the reforming of audit office,to a certain extent,improves the efficiency of the auditing market,and provides a new method to improve auditing level.This paper is divided into six parts: the first part mainly introduces the research background,the significance of this paper,the innovation point and the methods used in this research.The second part is the review of related literature at home and abroad,such as the research of audit fees determinants,audit quality alternative variables,the relation of abnormal audit fee and audit quality and relative research of organization form of accounting office.The third part is the analysis of the principal-agent theory,and put forward the hypothesis based on the theory.The fourth part contains the sample selection,variable interpretation and the model.The fifth part is the result of the empirical research.The sixth part is the conclusions of this paper.