Internal Control Defects,Nature Of Property And Internal Control Audit Fees

At the beginning of the 21 st century,financial incidents of listed companies such as Enron and WorldCom in the United States shocked the world.People began to discuss how to avoid the occurrence of financial fraud.In this context,internal controls that can prevent companies from making mistakes and frauds attracted unprecedented attention.This prompted the U.S.Congress to pass the <Sarbanes-Oxley Act> in July 2002.The law provides that external auditors should conduct audits on the design and operation of public companies' internal controls and issue independent audit opinions.In June 2008,the Ministry of Finance of the People's Republic of China together with other four ministries and commissions jointly issued the <Basic Norms for Corporate Internal Control>,which is known as the "SOX Act" with Chinese characteristics.And in April 2010,the Ministry of Finance of the People's Republic of China together with other four ministries and commissions jointly reissued the < Enterprise Supporting guidelines for internal control>,which includes auditing guidelines,18 application guidelines,and evaluation guidelines.The < Enterprise Supporting guidelines for internal control>shows that China has finally built a complete system of internal control standards.The Supporting Guidelines stipulates that: "Since 2011,companies that have been publicly listed both at home and abroad should conduct self-evaluations on the design and operation of internal controls.At the same time,the listed company should hire an external auditor to audit the internal control over financial reporting in each year,and publicly release the audited self-evaluation report.From 2012 onwards,this will be extended to the Shanghai and Shenzhen Stock Exchange listed companies".The promulgation of the above guidelines has greatly promoted the process of building internal controls for listed companies in China and provided favorable conditions for academic research.From the perspective of certified public accountants,this article separately studies the impact of severity and rectification on the internal control audit fees.And further divides the sample companies into state-controlled listed companies and non-state controlled listed companies,studies the types and rectification of internal control defects under different property rights.First of all,this article collects and collates relevant domestic and foreign literature,including the definition and classification standards of internal control defects,the factors influencing the audit fees of internal control and the mechanism of these factors,the relationship between internal control defects and audit fees.Most scholars' researches focus on the factors that affect the internal control audit fees.They have not yet thoroughly discussed the types and rectification of internal control defects.This provides an opportunity for this study.Secondly,starting from the meaning and type of internal control defects,this paper discusses the mechanism of internal control defects,the nature of property rights and the internal control audit fees,and discusses the basics theories of risk-oriented auditing,cost-effectiveness,risk premium and signal transmission.Through the derivation of related theories,it verifies that internal control defects will affect the company's internal control audit fees,and further lays a theoretical foundation for studying how the nature of property rights affects the relationship between internal control defects and internal control audit fees.Based on this,four hypotheses are proposed.Then,this article selects the 2012-2015 data of listed companies on the A-share board in China as the research object.And considers the influence of factors on the internal control audit fees,such as the company's scale,current ratio,the reputation of the accounting firm,the effectiveness of internal control,the proportion of the management's holdings,and the industry in which the listed company is located.This article uses Stata12.0 statistical analysis software to perform multiple regression analysis and other empirical tests on the sample data,and ultimately come to the following research results:(1)The more serious internal control defects in the company,the higher internal control audit fees that need to be paid to accounting firms.This indicate that CPAs will comprehensively consider the impact of different types of internal control defects during the auditing process;(2)The rectification of internal control defects negatively affects the internal control audit fee.The higher degree of defect rectification,the less the internal control audit fees paid by the company;(3)After further discussing the mechanism based on the different nature of property rights of listed companies,it finds that the severity of the internal control defects in state-owned enterprises has a strong positive influence on the audit fees of internal control and a strong negative impact of the state-owned enterprises' internal control defects rectification on the internal control audit fees.Finally,in order to improve the reliability of the empirical research results,this article uses the method of replacing explanatory variables to implement the robustness test on the research model.The results show that the model's regression analysis results have a certain degree of robustness.Finally,this study finds that the existence of internal control defects in the company will affect the internal control audit fees.Compared with non-state-owned enterprises,this effect is even more pronounced in state-owned enterprises.This article proposes relevant suggestions from three aspects.For the company,management must change the concept of ignoring the internal control,improve the control environment and internal control system,improve the operating efficiency,and reduce the risk of internal control;For the auditor,it is necessary to continue to strengthen the use of modern risk-oriented auditing and make full use of the internal control defect information for auditing;For the regulatory authorities,it is necessary to strengthen the supervision of non-state-owned enterprises.At the same time,put forward higher requirements for the internal control and risk management of non-state-owned enterprises,gradually increase the cost of its violations,supervise the non-state-owned enterprises to rectify the defects of internal control,improve the internal control system and the quality of internal control.