Research On The Impact Of Exchange Inquiry Letter On Audit Fee

In recent years,with the vigorous development of the capital market,the problem of information asymmetry in the capital market has become increasingly prominent.In order to alleviate the negative effect of information asymmetry,it is particularly important to update and perfect the information disclosure system.Therefore,China’s Shanghai Stock Exchange and Shenzhen Stock Exchange comprehensively implemented the inquiry letter system in 2013 and 2014 respectively,taking it as one of the non-punitive regulatory means.By examining the fairness and compliance of the information disclosure of listed companies,Thus,the stakeholders of listed companies can be guaranteed to understand the real financial condition and operating results of the company and the orderly operation of the capital market.At the same time,for certified public accountants,one of the important stakeholders,the exchange inquiry system will increase their perception of audit risks,and thus lead to more stringent procedures,more costs,and higher audit fees in the audit process.This paper focuses on the audit market,taking listed companies that have received inquiry letters from Shanghai and Shenzhen Stock Exchanges from 2015 to 2021 as the research object,and explores in detail the effect of inquiry letter mechanism on audit fees.Firstly,this paper defines the concept of relevant research objects.Secondly,based on the theoretical analysis of information asymmetry and signal transmission,this paper puts forward the research hypothesis:the audit cost will increase significantly if the listed company receives the inquiry letter;The inquiry letter requires certified public accountants to issue verification opinions,the inquiry letter content involves the company’s internal control and risk management and litigation,the inquiry letter category belongs to the annual report inquiry letter,then the audit cost is significantly increased.Then,this paper selects A-share listed companies in Shanghai and Shenzhen during 2015-2021 as samples for empirical analysis.The study found that the audit fees of listed companies receiving inquiry letters from the exchange were higher.At the same time,the increase of audit fees is more significant when receiving inquiry letters requiring CPA to express verification opinions,involving the company’s internal control and risk management and litigation,and raising questions about the annual report of listed companies.Based on the group regression analysis of whether the property rights belong to state-owned enterprises,this paper finds that the promotion effect of inquiry letters on audit costs is more obvious in non-stateowned enterprises.Finally,based on the empirical analysis,this paper puts forward relevant policy suggestions from the three levels of listed companies,regulatory authorities and certified public accountants.The main contributions of this paper are as follows:First,most of the previous studies on inquiry letters focused on the single feature of the letter.However,this paper studies the impact of inquiry letters with different features on audit costs from three perspectives:requirements,contents and types of inquiry letters,and innovates the research perspective.Second,previous studies on inquiry letters on the audit market have all adopted the mixed regression method of control year and industry,while this paper adopts the two-way fixed effect model of control individual and time to cluster the regression level into individual companies,which has a more robust effect and provides data support for future related studies.