| After the Enron scandal,the United States enacted the Sarbanes Oxley Act(SOX act),since then,many countries have followed the US to issue their own internal control information disclosure standard,which provides data support for domestic and foreign scholars to do internal control researches,and one of important research fields is the impact of internal control weakness on audit fees.Due to the developed internal control system and standardized internal control information disclosure,foreign related researches are more mature,the results are relative reliable.however,in China,internal control system started late,relevant specifications are not uniform and lack of operability,as a result,the disclosure of internal control information exists much problems,at the same time,different from SOX act that requires disclose internal control deficiencies over financial reporting,Chinese internal control standard requires companies to disclose overall internal control deficiencies,as a result,researches about the relationship between internal control weakness and audit fees are few,the conclusions are not uniform and reliable.Considering this,this paper uses US-listed Chinese companies as a sample to study the relationship between the internal control deficiencies and audit fees in order to obtain a more reliable conclusion and make up for domestic research deficiencies in this area.In addition,after reading domestic and foreign related research literatures,I found the related studies mainly focused on whether the disclosure of internal control deficiencies or the type of internal control weakness influences audit fees,there is little research about influence mechanism on the relationship between internal control deficiencies and audit fees,in order to compensate for the lack,after examining whether internal control weakness disclosure influence audit fees,this paper investigates the impact of audit firm size on the relationship between these two factors.The conclusions of the study are as follows: first,Overall,the disclosure of the internal control deficiencies did not produce significant impact on audit fees;second,the "big four" accounting firms charge higher audit fees to the clients with internal control deficiencies,but the "non big four” accounting firms charge lower audit fees to the clients with low internal control quality.This study shows that first,on the whole,auditors responsible for US-listed Chinese companies are not in accordance with the modern risk oriented auditing standards when implementing audit work,not fully understand and evaluate internal control risk,not increase audit resources to the clients with internal control deficiencies and perform more audit procedures.Second,accounting firm size is one of the factors that could affect the relationship between internal control defects and audit fees,compared to the "non big four" accounting firms,the "big four" accounting firms can follow the modern risk oriented audit standards,based on full understanding and evaluation on internal control risk,putting more audit resources to the customers with higher risk and performing more audit procedures,and then charging higher audit fees.This study extends research fields and contents at the aspect of internal control deficiencies and audit fees,helps to verify the implementation of modern risk oriented audit in practice and broaden the research scope and content to overseas listed companies. |
