The Empirical Study On The Impact Of Relationship Between Audit Committee And CFO’s Power On Audit Fees And Accruals Quality

The audit committee is an important institutional arrangement in the corporate governance structure.In December 2007,the Commission requires listed companies to disclose the performance of the audit committee’s duties in the annual report,which requires the strengthening of the audit committee of listed companies to fulfill their own responsibilities.However,some auditors have found that the management of the enterprise still has a greater impact on the activities of the audit committee(Cohen,Krishnamoorthy,and,Wright 2010),and the current research only consider the effectiveness of the audit committee(McMullen1996;Liu and Ma 2008),but not consider the impact of the management.Therefore,this paper studies the relationship between audit committee and CFO’s power,and analyzes the effectiveness of the audit committee’s performance.Due to the influence of many factors,the relationship between the audit committee and CFO power may not be easy to observe in a stable external environment,in order to research the impact of the relationship between the two power on the quality of audit fees and accruals quality,this paper choose the adverse changes of industrial policies as the research window,making the impact of the relationship between audit committee and CFO’s power on the audit fees and accruals quality can be highlighted."Five Year Plan" is a kind of development model with Chinese characteristics,different development plans means that industrial policy will tilt to different industries,resource allocation will be gathered to new industries.By the adverse influence of industrial policy,CFO of enterprises will face greater pressure on the operation,becasuse of the pressure of performance and self motivation,CFO may affect audit fees and accruals quality.By the favorable influence of industrial policy,the enterprises may have different performance.According to the responsibilities of audit committee requirements,in order to protect the interests of investors and shareholders,audit committee should supervise enterprises’ audit quality and quality of financial reports,so CFO are likely to impact on audit committee’s responsibilities.This paper selects 2006-2015,namely "11th Five-Year" plan to "12th Five-Year" plan as the research period,the final choice of Shanghai and Shenzhen markets 2798 samples for analysis,to sudy two different kinds of enterprises’ behavior when the adverse changes ofindustrial policy happened,the difference on the effects of relationship between the two power on audit fees and accruals quality.The study found that,when adverse changes of the industrial policy happened,the enterprise which faced adverse changes of the industrial policy,the CFO who have large power will inhibit the audit fee increase,and when the audit committee has more power than CFO,CFO for suppressing the growth of audit fees will be eliminated,but there is no such phenomenon before adverse changes of the industrial policy;further study found that,when adverse changes of the industrial policy happened,the enterprise which didn’t face adverse changes of the industrial policy showed the greater power CFO have,the higher accruals quality enterprises have.And the audit committee showed complementary with CFO’s power,as the result,the accruals quality improvement is more significant.But this phenomenon didn’t happen in enterprises which didn’t face adverse changes of the industrial policy.To sum up,the influence of the relationship between audit committee and CFO power on audit fees and accruals quality is different,the former is restriction,the latter is complementary.This phenomenon can be only discovered when there is external environment adverse shock.The findings of this paper pointed out the relationship between audit committee and CFO is not as simple as the discreption of some regulations,but a more complex relationship,this complex relationship not only to question the current enterprise audit committee’s responsibilities and the relevant provisions,but also provides a direction for future policy formulation.