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Research On The Effect Of Litigation Risk To Audit Decision

Posted on:2019-08-28Degree:MasterType:Thesis
Country:ChinaCandidate:D ShangFull Text:PDF
GTID:2416330632454322Subject:Accounting
Abstract/Summary:PDF Full Text Request
Company litigation is usually regarded as a unconventional matter that seriously affects the normal operation of an enterprise,and it will bring the negative impact of litigation fee,litigation compensation and reputation damage.With the rapid development of China's economy in recent years,the number of companies is increasing,and the activities of the company are becoming more frequent.The number and amount of the company's litigation are rising.Under risk-oriented audit mode,the auditor needs to carry out overall assessment of corporate risk,and make a risk decision.Generally speaking,the auditor's decisions mainly include the audit opinions and audit fees decisions.With the increasing complexity of economic activity,the diversification of financial fraud and the strengthening of supervision,the practice risk and legal liability of auditors are also increasing.Therefore,auditors should pay more attention to the source and motive of audit risk,carefully evaluate the various risks of the audited entity and make appropriate response.Company litigation should be paid more attention by auditors because of its complexity and specialism.Current research mostly focuses on company litigation risk impact on audit opinion or audit fees each aspect-This paper expands the study angle,which studies the impact of litigation on audit fees,audit opinion and their relationship.The abnormal audit fees refer to the deviated difference between the actual audit fee and the normal audit fee under the influence by related factors.That is to say,the actual audit fee consists of two parts,one part is the reflects the values of audit quality,which is the reasonable part of audit fee;the other part is deviated part from the reasonable audit cost of a part of the audit cost,namely the abnormal audit fee.This paper selects the abnormal audit fee as an alternative variable to measure the auditor's charge decision;because there was also stickiness in the audit fees of Chinese listed companies.On this basis,this paper further considers the legal environment,and studies the impact of company litigation risk on interaction of audit fee and audit opinion in different legal environments.Based on Chinese A-share main board listed companies from 2012 to 2016,this paper studies the impact of litigation on audit fees,audit opinion and their relationship.The findings of empirical study are as follows.Firstly,the listed company's litigation risk is not only significantly and positively related to modified audit opinion,but also with the propensity to receive modified audit opinion from their auditors.Secondly,under the impact of litigation risk,there exists a substitution relation in auditor's choices between charging more audit fees and issuing modified audit opinion.Thirdly,after considering legal environment,we find the substitution relationship in auditor's choices between charging more audit fees and issuing modified audit opinion is more significant.Based on the conclusions above,this paper makes some reasonable suggestions from the perspective of listed company,auditor,regulator and public investors.
Keywords/Search Tags:litigation risk, audit decision, audit opinion, abnormal audit fees, legal environment
PDF Full Text Request
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