Earnings Forecast, Quality Of Internal Control And Audit Fee

As the demand of information is growing,the information disclosure systems of capital market also develop and improve with it in recent year.In order to make up for the time-lag effect of regular report,timely release relevant risk,ease information asymmetry problems,protect the legitimate rights and interests of investors,especially small and medium investors,earnings forecast system arises at the historic moment.Since earnings forecast system put in practice in our country,the information of earnings forecast are more and more widely used by market participants.The influence factors of its disclosure quality and its market reaction has been a hotspot of academia.Existing research shows that,as an important forecast information disclosed by the management,earnings forecast information have information content,and have influence on investment behavior,earnings management and analysts' predict behavior.So,as an important market participant,whether CPA use earnings forecast information to audit risk assessment or not? Whether the disclosure quality of earnings forecast affect audit fee or not? So far,there is little research to answer these questions.According to audit standards,CPA should pay attention to the key performance indicators,performance trends,forecast,budget and variance analysis of audit unit to understand the measurement and evaluation of its financial performance,which helps to identify and assess material misstatement risk of the financial statements to design and implement further audit procedures.Under the guidance of the risk-oriented audit,the audit process is based on the risk assessment.Therefore,as an important basis of risk assessment,earnings forecast may affect the assessment of the material misstatement risks and further impacts the audit service pricing.Based on present system and existing research results,our research combine the theoretical analysis research method and empirical test research method,from the perspective of the audit risk,to examine the relationship and the influence mechanism between the accuracy of prophase earnings forecast and audit fee,and further explore the influence of internal control quality on their relationship.This study tries to discuss the following three questions: firstly,whether the auditors use previous earnings forecast information in audit pricing or not and whether previous earnings forecast disclosure quality will affect audit fees? Secondly,as an indispensable indicator of the audit risk assessment,whether the quality of the internal control will affect the relationship between earnings forecast disclosure quality and audit fees.Finally,whether the attitude held by the management in the disclosure of earnings forecast,in other words optimistic or pessimistic,affect the relationship between earnings forecast,internal control quality and audit fees.The study finds that the bias of previous management earnings forecast significantly positively related to the audit fee,that is to say the lower the accuracy of previous management bias forecast,the higher audit fee.And high quality internal control can effectively relieve this positive correlation.Further research shows that this relief effect only significantly effective to the firms that disclose optimistic earnings forecast.Moreover,the lower the accuracy of management bias forecast for the last year,the more likely to get modified audit opinion,while high quality internal control can also relieve their correlation.The research results show that the performance of listed companies is a warning signal that helps the auditor to assess material misstatement risk,and a good internal control can reduce the audit risk.Whole text consist of six chapters,chapter 1 is the introduction,this part briefly introduce the research background,significance,purpose,methods,ideas and the framework of the article.Chapter 2 is literature review,this part introduce the relevant literatures about the affecting factors of audit fee,earnings forecast and the quality of internal control.Chapter 3 is related system background and theoretical basis,this part briefly introduce the current earnings forecast disclosure system,internal control system and related theories such as the signal transmission theory,asymmetric information theory and so on.Chapter 4 is research hypothesis and research design,this part build a theoretical framework of this article on the basis of existing literature and relevant theories,based on the theoretical analysis put forward reasonable research hypothesis,and corresponding research design according to the research hypothesis.Chapter 5 is the empirical test and results analysis,this part using the multiple linear regression model empirically investigate the relationship between the accuracy of earnings forecast and audit fees,and basic analysis of the results.Chapter 6 is research conclusion and policy recommendations,this part shows the conclusion base on the empirical test results and the relevant analysis,and then put forward policy suggestions about improve earnings forecast disclosure system and internal control system.At the same time,analyzes the limitations of this study,and accordingly put forward the feasible research in the future.