Audit Fees, Service Quality And Client Loyalty

In the fierce market competition, customers have already become an important resourceof audit firms. Along with the intensive comprehension of the importance of customer loyalty,customer loyalty of audit firm has attracted broad interest attention of Academia and Business.In recent years, with the continuous development of securities market in China, thephenomenon that customer changes firm is more and more frequent, but there are still manyclients continue to be loyal to their audit firms for several years. Therefore, it is necessary tocombine the actual situation in our country and explore the cause that the customer to be loyalto their audit firms for many years. The purpose is to provide theoretical support andsuggestions in improving the relationship between audit firms and loyal customer.Based on the study of the client loyalty by domestic and foreign theories，this thesis takesseveral theories about audit contractual relationship, develops hypotheses and selects relevantvariables affecting customer loyalty according to the hypothesis, studies client loyalty bylinear regression and logistic regression methods. The study has found the following points.Firstly, audit fees are positively related to the loyalty of clients. On further analysis, theloyalty of clients that pay higher audit fees relative to similar clients in their industry is highlyaffected by further increases in relative audit fees. However, the loyalty of clients that paylower audit fees compared to similar clients in their industry is not affected by increases inrelative audit fees. There is a higher probability of losing a client, when increasing the auditfees, if this client is already paying high audit fees relative to similar clients. However, thisprobability is lower if this client is paying lower amount of audit fees relative to other clients.Secondly, service quality is negatively related to the loyalty of clients. Thirdly, differentcustomers have different preferences on audit firms, customers of good financial situationprefer high quality firms, customers of poor financial situation prefer low fees firm.The study is from a client viewpoint to investigate client loyalty and how it is affected byaudit fees and service quality. The research findings enrich the theory of audit. The results ofthis paper have important practical meaning. For audit firms, only they reduce the audit fee,improve service quality, set different strategies on different customers, they can eventuallywin loyal customers.