Quality Of Credit Assets And Audit Fee

Of the various types of financial industry,banks occupy the most core position.As the most traditional type of financial industry,banks always play the role of financial intermediaries through absorbing deposits and making loans,effectively solving the problem of inefficient resource allocation caused by asymmetric information in financial market,which hugely supports the development of the real economy.The biggest risk area for the banking industry in the process of operation lies in the loan business.The loan recovery risk continues to exist because of the debtor's business difficulties or malevolent arrears.As a result,the authorities set up many specifications for the loan business of the bank,including the five levels' classification of loan according to the repayment risk.Banks should accordingly make provision to cope with the risk of future recovery.However,there is a great risk of misreporting due to the self-determination when banks classify its loan and make provision.For auditors,it is also an important misstatement risk.The external audit means that auditors provide reasonable guarantee for whether there is significant misstatement in the financial statements in order to reduce the failure of financial reporting users due to information asymmetry.Under the current risk-oriented audit mode,auditors are able to decide the input scope of audit resources by judging the risk of misreporting of the audited entities and implement the audit procedure to reduce the audit risk to an acceptable low level.Therefore,when auditors are faced with the risk of non-performing loans and loan classification risks,the identification and balance of audit risk is the forerunner of the implementation of audit procedures.This paper chooses the bank industry as the research objective which is seldom studied by most scholars.Furthermore,this paper selects the loan business that is core business of the industry to research the relations among loan classification,provision and audit fees in order to reveal the motivation of the loan classification of commercial banks and how auditors pay attention to and weigh the risks of non-performing loans and the risk of loan classification in the process of auditing.Based on the empirical research of 2006-2016 years' A share listed commercial bank data,we find that under the background of narrowing spreads,commercial banks have enough motives to hide non-performing loans.At the same time,the loan classification of commercial banks will significantly reduce the level of its provision.However,the auditors pay more attention to the risks involved in non-performing loans,and there is a lack of concern about the risk of loan classification.