Exploring The Association Between Human Capital And Audit Cost

American economist Schultz first put forward the concept of human capital,he put the man's health investment and education investment were regarded as human capital investment(Schultz,1960).He paid attention to the role of education in the formation of human capital,and thought that experience accumulation was only a supplement to education.Therefore,education level has become an important indicator to measure the human capital of enterprises(Schultz,1961;Mankiw et al.,1992;Barro and Lee,1993).At present,the research on audit fees mainly focuses on the characteristics of listed companies,accounting firms and auditors.It is believed that there are three main factors influencing audit fees,namely audit cost,audit risk premium and profit of accounting firms.Generally speaking,audit fee is the audit resource input of accounting firm and the audit risk compensation required by accounting firm.Reasonable audit fees can not only maintain the independence of accounting firms,but also ensure the quality of audit,promote the stable development of accounting firms,improve the transparency of information disclosure of listed companies,protect the legitimate rights and interests of investors,and maintain the security of economic order.Existing studies have not focused on the impact of human capital quality on audit fees.However,Dyck et al.(2010)found in a comprehensive survey of fraud cases from 1996 to 2004 that company employees identified and disclosed fraud more frequently(17%)than auditors(10%)and SEC corporate finance(7%).Call et al.(2017)found that companies with higher quality of human capital exhibited higher quality of accrued earnings,fewer internal control violations,and fewer restatements.In addition,existing studies show that those with higher education levels are more proactive in conducting supervision when corruption is suspected(Glaeser and Saks,2006).So does the quality of human capital affect audit risks and therefore audit fees?If so,what are the mechanisms that affect audit risks and audit fees?These questions constitute the research motivation of this paper.In this paper,16,052 observation samples of a-share listed companies in China's capital market from 2008 to 2017 were selected as research objects to systematically investigate the correlation effect and mechanism between human capital quality and audit charges.The findings are as follows:(1)there is a significant negative correlation between the quality of human capital and audit charges,and the results are still valid even after controlling the annual(YEAR)and industry(IND).(2)the correlation between human capital quality and audit fees is significantly different among listed companies with different internal control quality;(3)the correlation between the quality of human capital and audit fees is significantly different among listed companies with different business complexity.The marginal contribution of this study is:(1)New variables.In this paper,new variables collected manually and specific to the company level are used to measure the quality of human capital,which is more accurate than the ratio of employees with different educational backgrounds in the total number of employees in the industry used in the existing research.(2)New content.This paper examines the influence and mechanism of the characteristics of all employees rather than the characteristics of senior managers on audit charges,and expands relevant literature on the economic consequences of human capital quality.(3)New perspective.From the perspective of the quality of human capital,this paper effectively links the relationship between human resources and audit market,and provides some practical guidance for optimizing the auditor's decision-making and improving the level of information disclosure.