A Study Of The Correlation Between Public Pressure And Auditing Price

At the beginning of 21st century,the cover of Fortune magazine questioned about the Enron Corp's stock price which directly led to public questioning of Enron Corp profits and further led to related litigation events;Chinese Finance magazine's cover article directly caused China Securities Regulatory Commission(CSRC)pay attention to Yin Guangxia,finally the magazine successfully revealed the Yin Guangxia financial fraud event;Daily News reported the delay for the Toshiba's financial statements and the news directly caused intervention by Japan Financial Services Agency.In the process of government regulators'pressure,Toshiba's inflated profits was gradually surfaced.The listed companies and accounting firms are facing great pressure which is brought by media,government and external regulatory agencies.This concern and anxiety from stakeholders is called public pressure.Therefore,whether the public pressure has impact on the auditor's pricing behavior or not is an issue worth exploring.Using data of listed companies in China from 2009 to 2015,we study the impact of public pressure on pricing behaviorThe results show that the influence of public pressure on the auditor's pricing behavior is embodied in two aspects:first,public pressure has positive effect to audit delay as the representative of the audit resources which lead to increase of audit costs;second,by control audit costs,public pressure can still have significant influence to audit pricing by improving auditor's risk expectations.Further research proved that public pressure as a kind of external supervision mechanism has a certain stability,especially the cultural environment and legal environment does not change in the high litigation risk environment.However,the pressure of government supervision may malfunction under the high litigation risk environment.This study can help extend the application range of public pressure.At the same time,the external supervision mechanism of audit pricing was integrated into a unified framework through the theory of public pressure which provide new idea for other study on audit price.