Deviant Strategy,Quality Of Internal Control And Audit Fees

The corporate strategy determines the long-term goals of the company and the ways in which actions and resources are allocated to achieve the goals.Therefore,the strategic choices of the company reflect the differences in business characteristics and operational risks.In the long-term development practice,the mainstream practice of the enterprise will form the industry's conventional strategy.After the practice test,the industry's conventional strategy can well avoid or resist the industry's conventional risks,than achieve industry's conventional operating results,that is,operating results are roughly equivalent to the industry average.The fierce market competition has prompted some enterprises to take risks in order to achieve extraordinary business performance.They take a strategy that deviates from the industry's routine.Scholars refer to the degree of deviation of the corporate strategy from the industry's routine as the deviant strategy.Differences in corporate strategy will cause differences in corporate risks.Enterprises with different corporate risks will cause auditors to face different audit risks,and auditors will take some risk response measures.Therefore,corporate strategic differences are likely to be an important factor to audit fees.Research on the factors affecting audit fees often ignores the factor of the deviant strategy.Internal control can prevent enterprise risks and achieve stable operation of enterprises,which is an effective means to ensure the realization of corporate strategic goals.Scholars have conducted extensive research on the impact of internal control quality on audit fees.Although no consistent conclusions have been reached,it is increasingly clear that there is a correlation between them.There is little research on whether internal control quality can prevent audit risk and then affect the audit fees.This study probes into the relationship among the deviant strategy,internal control quality and audit fees.It is of great theoretical and practical significance for auditors to reasonably evaluate risk and set a price.It can strengthen and improve the construction of internal control.It can improve corporate governance mechanisms.This study analyzes the related literatures of the deviant strategy,the quality of internal control and audit fees.Based on principal-agent theory,information asymmetry theory and risk-oriented audit theory,this study analyzes the relationship among the deviant strategy,internal control quality and audit fees and propose three assumptions and constructs three empirical test model.This study sorts out 10940 data of listed companies in China's A-share in2013-2017 as a research sample for empirical testing.The results show that the greater thedifference of the deviant strategy,the higher the audit fees;the higher the quality of internal control,the lower the audit fees;the improvement of internal control quality can alleviate the increase of audit fees induced by the increase of the deviant strategy.During the research,it was also found that the impact of the deviant strategy and internal control quality on audit fees mainly includes both audit cost and risk premium.According to the research results,this paper presents relevant policy recommendations: auditors should fully consider the factors of the deviant strategy when they provide audit services,so as to conduct risk assessment and audit fees more reasonably.Auditors should maintain due vigilance for companies with large strategy difference.Higher audit fees should be charged to prevent the risk of the deviant strategy.Enterprises should strengthen the construction of internal control and should consider the deviant strategy to ensure the effectiveness of internal control at the design and implementation level.Enterprises should improve the governance mechanism system,on the one hand,hire high-quality independent directors to strengthen the management of the company and major shareholders.Supervise and improve the effectiveness of corporate governance.On the other hand,enterprises should pay attention to the use of the work of the auditors,just like pay attention to the auditor's communication with the governance layer in the implementation of the audit process,which helps to prevent the risk of strategic decision-making.