An Empirical Study On The Influence Of Pending Litigation On Audit Fees

Audit fee is one of the important terms reached with listed companies before CPA undertakes audit business,which reflects the formulation of a kind of service price.In 2001,the Securities Regulatory Commission of China issued question and answer No.6 of the Code of Information Disclosure of companies issuing Securities-payment and Disclosure of Accounting firms,which clearly stipulates that listed companies should disclose audit expenses as an important matter in their annual reports.As a result,not only the audit fees of listed companies can be clearly reflected,but also the quality of information disclosure of listed companies in China has been improved,which has become a turning point in the study of audit fees in China.In recent years,as a result of corporate transactions,The activities are becoming more frequent and the illegal and illegal phenomenon is becoming more and more prominent,resulting in the rising number and amount of litigation involved in listed companies,thus increasing the risk of litigation,and pending litigation as a major uncertain matter,it is likely to affect the allocation of funds and the ability to continue to operate,which makes the CPA in accepting the commission,will assume greater audit responsibility.So,whether the CPA identified the pending litigation in the audit process and reflected it in the audit fees,this is worthy of our discussion.In addition,analysts,as important participants in the securities market,have proved that they have information in the securities market.As a result of external oversight,will listed companies with and without analysts be charged different audit fees in the face of pending litigation? Further,does the natural political link between state-owned listed companies and the government make them more sensitive to audit fees in the face of pending litigation than non-state-owned listed companies? These are all questions worthy of our consideration.This paper will focus on these aspects,which has certain theoretical and practical significance.This paper mainly adopts the method of empirical research.Through the relevant theoretical and policy background of audit fees and the current situation of pending litigation in China in recent years,this paper makes use of the relevant theories and policies of audit fees.The data of listed companies in Shanghai and Shenzhen A shares from 2014 to 2018 explore the existence of pending litigation,the amount of litigation involved and whether the different frequency of litigation will have asignificant different impact on audit fees.On this basis,further explore whether there are analysts follow-up and the different nature of property rights,will have different degrees of impact on audit fees.It is found that listed companies with outstanding litigation will be charged higher audit fees;the larger the amount of pending litigation involved,the higher the frequency of litigation,the higher the audit fee;the listed companies with analysts follow up,the audit fees caused by outstanding litigation will be increased,which is significantly lower.Involving companies that have not been followed up by analysts;non-state-owned listed companies with pending litigation will be charged higher audit fees.All the above conclusions have passed the robustness test.