Legal Environment, Internal Control Deficiencies And Audit Fees

With the enactment of the “basic norms of enterprise internal control” and the "supporting guidelines of enterprise internal control”,our country's internal control standards system was basically completed.The internal control evaluation report of listed companies was gradually transitioned from voluntary disclosure to compulsory disclosure,so more internal control information can be obtained.Auditing fee not only affects the interests of the two sides of the audit,but also has an impact on audit independence and audit quality,and then affects the interests of many financial reporting users.At present,our country's audit market is not mature,and there is no uniform standard for auditing fee,so the study about the influence factors of auditing fee has positive practical significance to the audit pricing of accounting firms and formulation of auditing fee standards by government.Certified public accountants should understand,evaluate and test the enterprise internal control,and then arrange the next audit procedure.So the enterprise internal control has become one of the research objects of the influence factors of auditing fee.In addition,legal environment is one of the important external factors that affect audit.It's also a question worth exploring what role does the legal environment play in the relationship between internal control defects and auditing fee.Based on the Cost Effect theory,“Deep Pocket” theory and Risk Premium theory,this paper first analyzes the disclosure actuality of internal control defects and auditing fee information,and then analyzes the influence of internal control defects on auditing fee and the legal environment' impact in the relationship between the two.The author selects listed companies from Shanghai and Shenzhen during 2013 to 2016 as samples,studies the effects of internal control defects and their types on auditing fee and the regulating effect of legal environment by regression analysis.It is found that there is a significant positive correlation between internal control defects and auditing fee,companies that have internal control defects will be charged higher auditing fee;compared with the design defects,operation defects have a greater impact on auditing fee;the good legal environment has no significant reinforcement effect on the positive correlation between internal control defects and auditing fee.Based on previous studies,this paper further elaborates the types of internal control defects,studies the different effects of design defects and operation defects on auditing fee,and studies the role of legal environment in the relationship between internal control defects and auditing fee,enriches the existing research results.In addition,this paper uses the internal control defects disclosed last year as the explaining variable,compared with using the internal control defects disclosed this year,it is more consistent with the actual process of audit pricing.