The Empirical Study Onaudit Qualityand Audit Fee

With the rapid development of securities market in our country, investors’ demandfor audit quality is higher and higher. Normally, The audit fees charged by the firm shallbe fair to reflect the value of the audit services provided. Since the SFC required listedcompanies to disclose their annual audit costs, parts of scholars conducted relatedresearch, but few scholars researched on the relationship between audit quality and auditfees from the perspective of the largest shareholder.This thesis is based on the share proportion of the largest shareholder and I studiedit with the data of all A-share listed firms in Chinese Securities Market from2011to2012in Shenzhen and Shanghai. First, I used the modified cross-sectional Jones modelto estimate our companys’ manipulalted accrual profits, then used the absolute value ofaccruals profits as a surrogate for audit quality. And I empirical studied on therelationship between audit quality and audit fees in the general case, no largeshareholders case and major shareholders case.This study indicates:(1) Now, on China’s audit market, the phenomenon of largeshareholders control is more serious;(2) When there is no big shareholder control inlisted companies, audit quality is proportional to the audit fee;(3) When listedcompanies exist in the big shareholder control, audit quality and audit fee is invertedU-shaped relationship. As big shareholder control problems and audit opinion shoppingproblems in the audit market in China, put forward the following Suggestions:(1)Optimize the corporate governance structure, strengthen the checks and balances,effectively curb fraud management;(2) Improve the independence of external audit,reduce the probability of audit opinion shopping;(3) Strengthen the external supervisionand financial disclosure while increase the penalties for financial fraud.