Research On The Influence Of Directors’ And Officers’ Liability Insurance On Corporate Audit Fees

Directors’ and Officers’ Liability Insurance(D&O)is an occupational insurance policy designed to provide a degree of cover for the liability of directors,supervisors and officers of companies,enterprises and other organisations for financial loss to third parties.It is designed to protect the assets of directors and supervisors,reduce the risk of their practice and provide an incentive for directors and supervisors to exercise due diligence.There are two main types of governance effects of directors’ and officers’liability insurance(hereafter referred to as directors’ liability insurance):the supervisory effect hypothesis,which suggests that the purchase of directors’ liability insurance introduces an external supervisory mechanism in the form of an insurance agency and strengthens corporate governance;and the opportunistic hypothesis,which suggests that the purchase of directors’ liability insurance provides a certain "underwriting effect" for directors,supervisors and officers."Based on the rational economic man hypothesis,directors,supervisors and executives will have a higher incentive to behave opportunistically.In this context,what is the attitude of auditors,as an external regulatory mechanism,towards the introduction of directors’ liability insurance,and how does its governance effect affect audit risk and,ultimately,audit fees?It is therefore important to explore the relationship between directors’ liability insurance and corporate audit fees.This paper first sorts out the literature related to directors’ liability insurance and audit fees,then explores the impact mechanism of directors’ liability insurance on audit fees,and takes the A-share listed companies from 2010 to 2021 as samples to control the company’s size,Variables such as firm type,audit opinion,firm change,inventory and proportion,using a multiple linear regression model,empirically analyzed the impact of directors’ liability insurance on audit fees.The research found that:(1)Directors’ and executives’ liability insurance(2)Under different shareholding structures,the higher the shareholding concentration,the more significant the impact of D&O insurance on audit fees;the lower the degree of equity balance,the more significant the impact of D&O insurance on audit fees More significant:(3)By purchasing the liability insurance of Dong,the listed company improves the risk-taking level of the enterprise,and then influences the audit fees of the enterprise,it has also increased the risk premium that auditors charge;(4)Compared with state-owned enterprises and companies with high equity incentives,D&O insurance has a greater impact on audit fees The promotion effect is more significant in non-state-owned enterprises,enterprises with low degree of equity incentives and poor regional rule of law.Based on the above research,this paper puts forward the following suggestions:(1)Strengthen the disclosure mechanism of D&O insurance;(2)Improve the corporate governance structure,including adjusting the ownership structure and strengthening the equity incentive policy;(3)Certified public accountants should maintain reasonable professional doubts and improve their professional level;(4)Improving the relevant legal system.