External Audit?Internal Control And Cost Stickiness

Cost management is the core problem of enterprise management,rationalization of cost can improve the operation efficiency of enterprise.For pushing enterprise to reduce cost,make decision scientifically and improve management efficiency,cost studies is one of focus of academic research.Cost stickiness is the important characteristic of cost,means that costs increase more when operating revenue increase than costs decrease when equivalent operating revenue decreases.The existence of the cost stickiness will decrease the operation efficiency,increase business risks,and restrain the development of enterprise.Therefore,the proposition of cost stickiness broaden new horizons in the field of cost research and academic studies.Adjustment cost,the optimistic expectations of mangers,and the opportunism of mangers,there three theories were widely accepted among previous studies on the cause of cost stickiness.The opportunism theory reflect the agency problems between mangers and shareholders.In pursuit of self-interest maximization,managers as agents,damnify the benefit of principals,and against principals'will,utilize the dissymmetric information to reallocate resource and adjust expenses.The opportunism behavior of managers will result in mismatch between expense and revenue,thus forms cost stickiness.To some extent,effective corporate governance can alleviate the dissymmetric information between shareholders and managers.The combination of internal governance and external governance may be able to supervise the managers' behavior effectively,and inhibit the opportunism motivation of managers,thereby decreasing cost stickiness.This paper use the sample of A-share listed companies during the period from 2012 to 2016,research the relationship between external audit and cost stickiness,and explore whether internal control can effect the relationship between external audit and cost stickiness.Draw the following conclusions:the existence of cost stickiness is widespread in our listed companies,and the lower the quality of internal control,the stronger the cost stickiness;external audit can restrict cost stickiness,and the lower the quality of internal control,the better the effect of external audit on cost stickiness.The effect of decreasing cost stickiness isn't supplementary but substitute when combining internal governance with external governance.External audit restrain cost stickiness better when the quality of the internal control is high than bad.The listed company should use internal governance and external governance properly according to its own circumstance,control managers' self-interest behavior effectively,rationalize cost management step by step,improve operating efficiency,promote company's steady development.