Analysis Of The Impact Of The Accounting Firm Reform On Audit Fees

Since July 2010, the Ministry of Finance has issued a series of regulations, requiring that large and medium-sized accounting firms should transformed into limited liability partnership within the prescribed time. By the end of 2011, there are 10 accounting firms having completed the organizational form reforming work. This paper will study the effect of reform on audit fees.Firstly, the paper introduces the related domestic and foreign literature, which is mainly talk about the limited liability partnership, audit fees and the relationship between them. We find that abroad research on the organization form mostly focus on how to extend limited liability partnership, while most domestic research remain at the theoretical level, empirical research about the relationship between the limited liability partnership and audit fees exists less and the conclusions are inconsistent. The paper also reviews the evolution of accounting firms changing forms in British American and China, reflecting the different development process in our country from overseas. Then, the paper theoretically analyzes the relationship between organizational form reforming and audit fees, and empirically researches the change of audit fees resulted from transformation.Specifically, the sample is A shares of listing companies which have published Annual Report. We test the relationship between audit fees, and the organizational form of accounting firms、transformation event、the scale of accounting firms. The aim of the paper is to explore whether the limited liability partnership would increase audit fees. The conclusions are as follows:(1) Comparing the difference of audit fees between reformed accounting firms and unreformed accounting firms, we find that the audit fees in accounting firms which have completed the transformation are significantly higher in 2012.(2) The comparison of audit fees changes before and after the accounting firm reforming shows that audit fees in 2012 are significantly higher than that in 2009, which means under the limited liability partnership, audit fees increased significantly.(3) Comparing the audit fees of reformed accounting firms from the perspective of firm scale, we find that audit fees in large scale firms are higher, which shows differences in firm size have a significant effect on audit feesIn summary, there is a positive correlation between the organizational form of accounting firms and audit fees. In order to speed up the pace of transformation, the paper finally put forward some policy suggestions based on the actual situation in our country.