Internal Control Quality And Audit Fees

The CPA audit of the financial statements of listed companies is one of the most important link to ensure the normal operation of the security market, however the audit fee is related economic bridge between listed companies and the CPA, and then justifiable and regulative audit fees play an important role for the healthy development of the securities market and the audit market. Internal control quality is the important factor that affects audit fees. High quality of the internal control has certain inhibitory effect for the entity’s earnings management behavior. And audit fees and the internal control construction has also been received extensive attention of academia. By using data of A shares from listed companies on the stock market of Shanghai and Shenzhen during 2013 to 2014 as example. We empirically examine the effects of internal control quality on the audit fees through the diversity of the internal control quality measures.There are five chapters in this paper. Chapter 1 is introduction. Chapter 2 is a review of the literature, where we categorize the research of internal control quality and audit fees, earnings management and audit fees, internal control quality and earnings management, factors of audit fees at home and abroad. Chapter 3 introduces theoretical analysis and research hypothesis. The hypothesis is underpinned by the theoretically analyzing the system background of audit fees, the relative theories of real earning management, agency theory, information asymmetry theory and signaling theory. Chapter 4 is the study design, where we introduce the sample selection and describes the data sources, variable definitions and research model. Chapter 5 makes an empirical test on the hypothesis proposed in this paper. Finally, it concludes the dissertation by stating its research conclusions, discussing its limitations and highlighting several issues for future research.The major conclusions of the dissertation are as follows:1.There is an insignificant negative correlation between internal control quality and audit fees. In this paper, we use the internal control general defeats, serious defeats, negative opinion, punishment as the substitute variable of internal control quality, they get the same conclusion: the higher of internal control, the lower of the audit fee.2.If the company with internal control serious defeats, the audit fee higher than general defeats.These company with internal control serious defeats, their control quality is worse.3.If the company received punishment, the audit fee higher than those companies without punishment. These companies who with punishment means worse internal control quality.4.Audit premium fee is mainly due to the CPA has increased investment in the audit process.