Research On The Impact Of Executive Excess Pay On Audit Fees

With the continuous improvement of China’s capital market,the "skyrocketing salary" of executives in listed companies has been continuously focused by investors.From the perspective of the theory of managerial power,the highly expanded power of management and the absence of internal supervision directly result in excessive compensation for executives and negative consequences for business operations.In existing research,scholars have mostly shown that the phenomenon of excessive compensation can increase agency costs,reduce corporate performance,and ultimately undermine corporate value.In view of this,although China has issued relevant management regulations and measures aimed at controlling executive compensation,the situation of excessive executive compensation still exists and no effective suppression methods have been found.Therefore,identifying and responding to excessive executive compensation has become an important issue.Listed companies usually require external independent audits at least once a year.The continuous increase in executive compensation not only puts enormous pressure on the company’s current profits,but also sends a risk signal of adverse information to the capital market.In the current context of risk oriented auditing,the core idea of auditing is to focus on paying attention to and managing the risks of the company or organization,rather than conducting a general audit of its financial statements or business processes.It is necessary to further study whether the phenomenon of excessive executive compensation will increase the operational risk and audit costs of enterprises.This article takes A-share non-financial insurance listed companies in China from2011 to 2021 as the research sample and combines existing literature at home and abroad to examine the impact of executive excess compensation incentives on audit fees.Research has found that there is a significant positive correlation between executive excess compensation incentives and audit fees.In the path test,it was found that operational risk is an intermediary variable between executive excess compensation and audit fees.In heterogeneity research,it was found that management power played a positive moderating role,while the legal environment played a negative moderating role.The contribution of this article is to broaden the research boundary of executive compensation,focusing on the level of excess compensation that differs from reasonable compensation,and extending the research boundary of executive excess compensation to the field of auditing,enriching the research on the economic consequences of executive excess compensation;Secondly,by linking executive excess compensation with audit fees through operational risk,it confirms the theory of managerial power and broadens the path research for executive excess compensation;Finally,considering the regulatory effects of different management powers and legal environments provides practical and theoretical basis for accounting firms to charge audit fees.Based on the conclusions drawn in this article,the following suggestions are proposed.Firstly,enterprises should establish and improve modern corporate systems to limit the power of executives.Secondly,accounting firms should maintain a high degree of professional skepticism in the face of executive overpayment,especially in the management power level to implement more necessary and adequate audit procedure.Finally,the country should improve and develop the socialist legal system,and form a fair,open,and orderly domestic unified market.