Earnings Management,Audit Fees And Audit Independence

Earnings management is more common in Chinese listed companies.With the improvement of the independent auditing system and the introduction of the "risk-oriented" auditing model in China,the CPA's awareness of risk is increasing,and more attention is paid to the earnings management behavior of listed companies.When the degree of earnings management of a listed company exceeds the importance of auditing,the CPA will issue non-standard audit opinions to reduce the audit risk to an acceptable low level to avoid severe penalties.According to the analysis of Francis and Krishnan(1999),the uncertainty of the accounting surplus is difficult for CPA to grasp.There is greater uncertainty in accounting surplus based on accruals.The CPA will issue non-standard audit opinions due to careful consideration.In the process of earnings management of listed companies,CPA will invest more audit resources due to rising audit risks,resulting in an increase in audit fees.Audit fees,as the main source of CPA's income,will affect audit independence to a certain extent.As the soul of CPA,independence is essential to the development of the audit industry.By combing relevant literature,the author finds that the current research on the relationship between earnings management,audit fees,and audit independence is relatively lacking,and the domestic research conclusions on the relationship between earnings management and audit independence of listed companies have not yet been unified.The reason may be that it ignores the impact of the degree of earnings management on audit risk.According to the "risk orientation",when a listed company conducts a large degree of earnings management,the CPA will think that the possibility of major misstatement is relatively high,,so the CPA will invest more More audit resources,more audit procedures,and more.However,when the degree of earnings management of a listed company is low,it may be because that the earnings management itself is not necessarily bad.On the other hand,the degree of earnings management may not exceed the level of importance set by the CPA.At this time,the CPA Non-standard unqualified audit opinions are not necessarily issued.Based on this,the author intends to select the data of A-share non-financial listed companies from2015 to 2018,using the method of the combination of theoretical analysis and empirical analysis.At first the author put forward the research hypothesis of this article through theoretical analysis,and build a Logistic regression model for earnings management to verify the moderating role of audit fees on earnings management and audit independence.At the same time,considering that different degrees of earnings management have different risks for CPA,the author divides the data into two groups of high earnings management and low earnings management based on the median of the data of the earnings management for further tests the of the hypothesis.Finally,the author uses the extended modified Jones model to recalculate the controllable accruals for robustness testing.The research results found that earnings management is significantly positively related to audit independence,indicating that in general CPA can identify and issue appropriate audit opinions on earnings management behaviors of listed companies.However,with the increase in audit fees,the relationship between earnings management and audit independence of listed companies will be weakened,especially for listed companies with a higher degree of earnings management,compared with listed companies with a lower degree of earnings management.It can be inferred that when management performs a higher degree of earnings management,there will be motivation and behavior to purchase audit opinions.Because when this happens,the management of listed companies will be more inclined to avoid the issue of non-standard unqualified audit reports by paying high audit fees.It can be seen that there is still an audit opinion buying behavior in the Chinese market,which needs to be paid great attention by the relevant regulatory authorities.There are two research innovations in this article: First,the author creatively studies the relationship between earnings management,audit fees and audit independence,and explores the role of audit fees in regulating the relationship between earnings management and audit independence.,and enriched the research framework of the relationship between earnings management and audit independence.Secondly,the previous research conclusions on earnings management and audit independence are inconsistent.It may be that the level of earnings management has not been considered.The author creatively considers the degree of earnings management to be divided into high and low groups,and further discusses the relationship between earnings management,audit fees and audit independence,making the research conclusion more rigorous.The research in this article has certain theoretical and practical significance.In the theoretical sense,this author studies the relationship between earnings management,audit fees,and audit independence.It also abandons the viewpoint of earnings management risk homogeneity,and discusses it in groups according to the degree of earnings management.It expanded research literature on earnings management and audit independence,while improving the framework of the factors affecting audit independence.In the practical sense,external stakeholders can indirectly estimate the general situation of listed companies through the types of audit opinions issued by certified public accountants.At the same time,the level of audit costs has certain guiding significance for stakeholders to understand how certified public accountants should respond to listed companies'earnings management.It is helpful to identify whether there is any audit opinion buying behavior of listed companies.Secondly,for the relevant departments,it is conducive to regulating the behavior of listed companies and reducing a higher degree of earnings management.At the same time,it provides a reference for evaluating the accountant's responsibility and can guide the relevant departments to pay more attention to the audit opinion buying behavior.