A Comparative Study Of Audit Burden Effect Of Mandatory And Voluntary ICFR Auditing

At the beginning of the 21st century,many incidents of accounting frauds such as Enron and WorldCom in the United States occurred frequently,prompting the US Congress to promulgate the Sarbanes-Oxley Act,and Section 404b of which required listed companies to disclose the audit report on the effectiveness of internal control.However,in 2010,the Dodd-Frank bill signed by Obama permanently exempted non-accelerated filers from implementing 404b.Therefore,accelerated filers' mandatory ICFR auditing and non-accelerated filers'voluntary ICFR audit will coexist in the United States for a long time.In order to respond to the changing trend of the international capital market and to strengthen the regulatory role of the internal control of listed companies in China,The Ministry of Finance has promulgated the 'Basic Norms for Corporate Internal Control' and three supporting guidelines in 2008 and 2010,which has promoted the further development of China's internal control.In August 2012,the Ministry of Finance promulgated the Notification on the Implementation of the Internal Control System for Classifieds of Listed Companies on the Main Board in 2012,which requires the listed companies on the Main Board to promote the implementation of the internal control system in sorts and batches,and encouraged other listed companies on small and medium-sized board and new OTC board and that have not been stipulated in the notice implement the disclosure requirements of the internal control system voluntarily.The promulgation of this notice indicates that the ICFR audit of Chinese listed companies will gradually move from voluntary disclosure to partial mandatory and partial voluntary disclosure.The US exemption of non-accelerated reporting companies from implementing ICFR audits is based on cost-benefit considerations because ICFR audits will increase the audit burden on listed companies.The existing literature mainly studies whether the ICFR audit will increase audit fees and the relationships between internal control deficiencies and audit fees.At present,mandatory and voluntary ICFR audit are concurrent in the United States and China,while Ettredge et al.(2017)compare the analysis of the differences in audit fees between mandatory ICFR audit and voluntary ICFR audit.Based on the background of institutional changes in Chinese special ICFR auditing,this paper takes the 2007-2016 A-share listed companies as research objects,and compares differences of audit burden between mandatory and voluntary ICFR audit with descriptive statistics,T-tests,and regression analysis.The results of the study indicate that:(1)Companies that imply internal control auditing have higher audit fees than companies that do not imply internal control auditing;(2)Compared with companies that implement ICFR audit voluntarily,audit burden of companies that impose ICFR audit mandatorily are higher;(3)Among the companies that voluntarily imposing ICFR audit last year and mandatorily this year,the costs this year were higher than last year.The research results of this paper have implications for the practical development of internal control,which helps the accounting firm to fully understand the internal control audit pricing.It can contribute to cost-effectiveness studies of ICFR audit and provide reference for the formulation of policies that require all listed companies to implement internal control audits or not in the future.