Executives' Affiliations With Accounting Firms And Audit Fees

In recent years,listed companies are increasingly favouring hiring former auditors of accounting firms as executives.In this paper,the phenomenon of auditor leaving from accounting firm and becoming an executive of listed company is called the executives' affiliations with accounting firms.Associated companies,executives and accounting firms are referred to as affiliated companies,affiliated executives and affiliated accounting firms.For affiliated companies,hiring a former auditor as an executive can use their professional skills and practical experience to generate revenue for the company.Moreover,the training cost and time cost of affiliated companies are greatly saved.For affiliated executives,affiliated companies can provide a broader career development platform to help them enhance their social status and realize their value in life.For affiliated accounting firms,a former auditor who leaves office as an executive in a listed company can help the firm gain more financial benefits.These reasons make the affiliation of executive accounting firms widespread.However,in audit failure cases such as "Enron" in the United States,"HIH Insurance" in Australia,and "Huishan Dairy" in China,the figures associated with executive accounting firms were found.Scholars began to pay attention to the possible economic consequences of the affiliation of executive accounting firms,and government regulatory departments also proposed corresponding regulatory policies,such as the Sarbanes Act and the basic Code of Professional Ethics for Certified Public Accountants in China.Limit the possible negative effects of this phenomenon.The audit fees are paid to the accounting firm by the listed companies.And the quality of the audit is influenced by the amount of the audit fees,so as the decision-making usefulness of the financial report information.Therefore,the audit fees have always been the subject of the study by the scholars.With respect to the effect of the executives' affiliations with accounting firms on the audit fees,some scholars said that due to the existence of the “alumni relationship”,the executives' affiliations with accounting firms would have the effect of reducing the audit fees.However,another study has found that the non-financial affiliated executives do not reduce the audit fees of the affiliated companies.So what is the impact of the executives' affiliations with accounting firms on the audit fees? And,after considering the type of the affiliated executives and the affiliated accounting firms,the influence of different types of executives' affiliations with accounting firms on the audit fee is different? This is the focus of this study.This paper mainly selects the sample data of the listed companies of the A-Share mainboard in Shanghai and Shenzhen in 2012-2017 to study the effect of the executives' affiliations with accounting firms on the audit fees.In the research method,the standard analysis and the empirical study are mainly used.On the content of the research,firstly,this paper discusses the effect of the executives' affiliations with accounting firms on the audit fees.Secondly,according to the position of the executives and whether the affiliated accounting firm is the international big four,the paper study the specific effect of the executives' affiliations with accounting firms on the audit fees.By means of multiple regression analysis,this paper has found that(1)The existence of the executives' affiliations with accounting firms makes the affiliated company pay higher audit fees.(2)Compared with executives that have been partners(or similar positions),the executives that have been ordinary auditors may cause the affiliated company to pay higher audit fees.(3)Compared with the executives that are decision-making type,the executives which are supervision-type will make the affiliated company pay higher audit fees.(4)Compared with international big four accounting firm,affiliated accounting firm which is a non-international big four,has a greater impact on the audit fees.The main innovations of this paper are as follows: firstly,in terms of data,this paper chooses 2012-2017 A-share main board listed companies as sample data,The audit fees of listed companies can be distinguished and controlled according to the regulations of the policy,which ensures the comparability of audit fees to the maximum extent.Secondly,this paper not only studies the relationship between the affiliation and audit fees as a whole,but also according to the types of positions of affiliated executives in affiliated accounting firms and affiliated companies.Whether the related accounting firms are the international "Big four" to divide the specific types of accounting firm associations,and to compare and analyze whether different types of the executives' affiliations with accounting firms have different impact on audit fees.Finally,this paper further discusses the way of the executives' affiliations with accounting firms on audit fees.