Research On The Impact Of Pending Litigation And Legal Environment Of Listed Companies On Audit Fees

As an important economic link between auditors and listed companies,audit fees reflect the price reflection of a special commodity such as audit services.In 2001,the my country Securities Regulatory Commission issued the "Question and Answer No.6 on the Standards for Information Disclosure of Companies Offering Securities to the Public-Payment of Accounting Firms and Their Disclosure",which requires that the annual audit fees paid by listed companies in my country must be disclosed as an important event.Therefore,this regulation has improved the transparency of audit fees and strengthened the public’s understanding of audit fees,which has become an important turning point in the study of audit fees.With the acceleration of my country’s economic development process,economic exchanges between enterprises have become more frequent,and violations of laws and regulations continue to appear,which has led to the continuous increase of corporate litigation risks.Pending litigation,as a major uncertain matter,has a negative impact on the company’s daily operations and reputation,and even affects the company’s financial status and ability to continue operations.In the face of clients with pending litigation,whether auditors can correctly identify their uncertain risks and reflect them in audit fees is a proposition worthy of discussion.At the same time,as an important part of corporate external governance,the legal environment can have a certain restraint mechanism on corporate behavior.Therefore,the role of the legal environment in the relationship between pending litigation and audit fees is also a proposition worth studying.Based on this,this article analyzes the impact of pending litigation and legal environment on audit fees with the help of information asymmetry theory,risk-oriented audit theory,audit insurance theory and ternary interaction theory based on the analysis of previous literature.Taking the Shanghai and Shenzhen A-share listed companies from 2013 to 2019 as a research sample,through constructing a multiple regression model to empirically test the existence of pending litigation matters,the amount of litigation involved,and the impact of the number of litigation involved on audit fees,and further explore the different legal environments Next,whether the impact of pending litigation on audit fees is different.The research results show that compared with companies with no pending litigation,auditors will charge higher audit fees for listed companies with pending litigation,and the higher the amount of litigation involved or the more frequent the number of litigation,the audit fee The higher it will be.This shows that when a listed company is involved in litigation,the company’s operating risk will increase.To cover up the negative impact of the litigation case on the company,the management will increase the company’s earnings management activities and adopt more vague information disclosure methods,resulting in the company The quality of accounting information is low,which in turn increases the auditor’s audit costs and audit risks,so audit fees are raised accordingly.Further research found that a relatively complete legal environment can ease the relationship between pending litigation and audit fees.Based on the above conclusions,this article proposes countermeasures and suggestions from three levels: strengthening the risk management of listed companies,improving the audit fee strategy,and establishing and improving the regulatory system,so as to promote the healthy development of my country’s capital market.