An Eimpirical Study On The Impacts Of Internal Control Defects And Their Rectification On Audit Fees

The audit service provided by the third-party intermediary accounting firms can provide reasonable guarantee for the legitimacy and fairness of the financial reports disclosed by listed companies.Therefore,independent audit service is a way to solve the information asymmetry between operators and owners under the modern company system.The fees charged by the audit firms reflect the result of the consulting game between the suppliers and the suppliers of audit services and the audit firms on the audit services agreed upon in the audit agreement.They are the links between the two parties in terms of contract and economy.The complexity and particularity of audit services determine the complexity of the mechanism for determining audit fees.This special subjective nature directly affects the independence,objectivity and even the professional ethics of the CPA profession,which affects the quality of audit reports,the effectiveness of audit services and the credibility of financial disclosure.Because of the diversity of audit fees,the issue of audit fees has always been a research hotspot in the auditing field.Since Simunic first proposed the classical audit pricing model in 1980,there has been an upsurge of empirical research on the influencing factors of audit fees in the academia.The relevant issues in China began in 2001 when listed companies were required to disclose audit fees publicly.The internal control system of a company is an immune defense line established by the company to resist internal and external risks,ensure operational efficiency and achieve operational objectives.In 2008,China began the construction of internal control laws and regulations.From the promulgation of the Basic Standards for Internal Control to the promulgation of the three Guidelines for Internal Control Matching in 2010,until now,China’s internal control norms have been established.The department was basically established.In the increasingly fierce market competition,the perfect internal control system is more likely to make the company committed to an invincible position.In the audit business,the effective internal control system established by the company itself can provide sufficient and appropriate audit evidence for CPAs to a certain extent,reduce the workload of CPAs in the audit business,thus affecting audit fees.This is why,after the introduction of the Sarbanes Act in 2002,the financial theorists and practitioners have paid unprecedented attention to the study of internal control system.Although China’s internal control laws and regulations system is gradually formed,in recent years,a series of financial fraud cases of Listed Companies in China have not only destroyed the company at once,but also affected the credibility of the audit industry.Therefore,it is still very important to further standardize the internal control of listed companies,and with the increasing attention of the society to third-party CPA auditing,and disclosure of audit fees is a hard requirement,audit fees become an important management cost of listed companies.Firstly,this paper conducts a normative study,reviews the relevant literature at home and abroad on the influencing factors of audit fees,the defects of internal control and the stickiness of its rectification on audit fees and internal control defects,and analyses the principal-agent theory,signaling theory,risk-oriented audit theory,audit risk premium theory,audit cost-benefit theory.On the basis of the analysis,four research hypotheses are put forward in this paper.Secondly,this paper takes the relevant data of A-share listed companies in Shanghai and Shenzhen Stock Exchanges from 2016 to 2017 as the research sample,and uses SPSS statistical software to make descriptive statistics,correlation analysis and multiple regression empirical test on the data of sample listed companies,and draws the conclusion of empirical test: Firstly,the defects of internal control of listed companies will lead to audit fees in the current year.Secondly,the impact of different severity of listed companies on audit fees is different,and the impact of the three on audit fees is weakened in turn.Thirdly,the internal control deficiencies in the current year will lead to the increase of audit fees in subsequent years.Fourthly,the audit fees in the next year will be reduced after the listed companies effectively rectify the deficiencies in the current year.Finally,according to the conclusions and the problems in the process of data processing,this paper puts forward some policy suggestions on the construction of internal control laws and regulations,the improvement of internal control system process and audit pricing,respectively,at the levels of relevant departments,listed companies and accounting firms.