Research On The Control Of Financial Risk To Reduce Audit Fee Of Hunan Construction Engineering Group

As the audit fee is the part of company’s cost, study on the affecting factors ofaudit fee, especially the company’s internal controllable factors to reduce audit fee, isan important and practical issue. On the other side, audit fee which is charged by theaccounting firm is also our focus. Influenced by many factors, the internal financialstatus is one of the most important factors affecting the audit fee. Taking constructionindustry as the background, this paper focuses on the relationship of audit fee andfinancial risk, and how to reduce audit fee through reducing financial risk. Meanwhile,this paper analyses the debt repayment ability, profitability, operating capacity anddevelopment ability of Hunan Construction Engineering Group, so as to find itsfinancial risk and make some meaningful suggestions.This paper mainly takes normative research method and empirical researchmethod as an auxiliary. Firstly, this paper elaborates theories of financial risk andfinancial control, and then makes a hypothesis that audit fee and financial risk havepositive relationship. Secondly, it uses data from listed company of constructionindustry to verify the above hypothesis. We find that the audit fee and financial riskhave positive relationship, which indicates we can reduce the audit fee throughcontrolling financial risk. Moreover, based on the above conclusion, we make a wholefinancial analysis of Hunan Construction Engineering Group, and find followingproblems: compared with the average level of construction industry, itsliabilities-to-assets ratio is higher, and debt paying ability is weak, so debt risk ishigher; its accounts receivable proportion is larger, and inventory turnover descends;its return on equity is lower, and profitability is weak. Lastly，we make followingsuggestions: reducing debt-to-assets ratio to improve capital structure; reducingaccounts receivable proportion to better receivables management; strengtheningprofitability; improving sound internal control mechanism; avoiding financial risk byappropriate technical means; increasing the portion of other operating part incorporation performance properly; introducing excellent risk-management talents;dealing well with stimulation and risk management; reducing financial risk; betteringoperating management so as to reduce audit fee finally.