Research On The Impact Of Annual Report Inquiry Letter On Audit Fees Under The Change Of Audit Institution

In recent years,with the gradual improvement of China’s capital market supervision system,the stock exchange has developed into an important supervision subject of listed company,and its supervision means are constantly innovating.In order to alleviate the information asymmetry dilemma between listed company and stakeholders and improve the quality of information disclosure,the regulatory system of inquiry letter represented by annual report inquiry letter came into being.Since 2015,Shenzhen Stock Exchange has gradually made public the content of the letter of inquiry and reply of annual report,which is mainly sent to listed company that has issued nonstandard audit opinions in its annual report,has delisting risks and has been subject to administrative penalties.As an external stakeholder with strong risk sensitivity,audit institution undertake the responsibility of verifying the financial statements of listed company.The annual report inquiry letter is an important signal to convey the risks of enterprise,covering major events such as business operation,finance and law,and the enterprise that receive the annual report inquiry letter is usually more vulnerable to further punishment.Therefore,from this logic,the regulation of exchange annual report inquiry will enhance the risk perception of audit institutions and lead them to charge higher audit fees.At present,most of the researches on the influencing factors of audit fees focus on the audited company and the audit institution,while the literatures on the impact of external objective environment are relatively few.Annual report inquiry letter is an external supervision mode that has emerged in recent years,and its path of increasing audit fees is not very clear and perfect in the current research.Audit fees are an important reflection of risk assessment and audit input of audit institution,and the increase of audit fees also reflects the regulatory effect of annual report inquiry letter from the side.Based on this,this paper analyzes the influence mechanism of annual report inquiry letter on audit fees of listed company from three perspectives from the entry point of the issuing elements of annual report inquiry letter,and puts forward corresponding suggestions based on this.The research methods used in this paper are literature research and case analysis.Based on the summary of the research and issuance status of annual report inquiry letter in our country,this paper analyzes the anchoring effect,revealing effect and deterrence effect of the issuance behavior,content and consequence on audit institution.The anchoring effect is the reference of audit institution’s previous project experience,and the revealing effect is the increase of audit input caused by the risk of material misstatement revealed in the contents of annual report inquiry letter.The deterrence effect is that the annual report inquiry letter increases the reputational risk of the audit institution and causes it to charge more risk premium.These three paths will eventually lead to the increase of audit fees.In addition,the change of audit institution has played a moderating role in the above effect.In the case of undertaking audit projects for the first time,the successor accounting firm depends more on the inquiry letter of the previous annual report in the uncertain environment,and the impact of the inquiry letter of the annual report on the audit fee collection is more significant.In the case analysis section,this paper selects the typical case of Tahoe Group,and based on the logical framework constructed by the above mechanism,comprehensively analyzes the internal mechanism of the increase in audit fees after Tahoe Group received the annual report inquiry letter and changed the accounting firm.Finally,based on the mechanism and case analysis,relevant suggestions are put forward from three levels:regulatory agency,audit institution and listed company.