The Effects Of Corporate Governance On Audit Fee

It is generally known that independent audit issues from the separation of ownership andmanagement right, and it means the supervising of Principal to agent, so it is one of importantstructure of outside monitoring and guarantee mechanism. With a series of financial fraud casesoccurred continually in big company such as Enron, WorldCom, the public start to focus on thisissue of quality of finance information, and ask for the accounting firms to Provide high qualityaudit services. Audit fee, the bond which Connect audit service supply and demand both sides, isclosely associated with audit quality. So the research on audit fee is an important topic in thefield of auditing research, with the significance. There have been a few empirical studiesinvolved in corporate governance’s impact on audit fee, however they do not get the sameconclusion.This paper aims at examining the impact of corporate governance on audit fee, by studying thedata of Chinese A share listed companies of201, based on audit-demand perspective. On thewhole, our findings provide limited support for the influence of corporate governance on auditfee in Chinese stock market. That means state-controlled listed companies pay fewer audit fee.Concentration of ownership is significantly positively associated with audit fee, while meetingtimes of board of directors, and executive compensation are significantly negatively associatedwith audit fee. The research also finds that manager ownership does not obviously influence onaudit fee. On the whole, our findings provide significant support that companies with bettercorporate governance need higher-quality audit service, and the audit fee will be higher. At last,this paper gives suggestion for companies to improve corporate governance, and some advice onmanaging the audit market.