Managers Overconfidence And Audit Fees

In China,ever since the China securities regulatory commission promulgated the question and answer no.6--payment to accounting firms and its disclosure on corporate information disclosure standards for publicly issued securities on December 24,2001,requiring companies to disclose the payment to certified public accountants,more and more scholars began to pay attention to the influencing factors of audit fees.As an important economic link between auditors and listed companies,audit fees not only ensure the smooth development of audit work,but also ensure that auditors can be conscientious.Overconfidence as a psychological term,is usually defined as individual due to overestimate their own success in decision-making and underestimate the probability of failure probability of bias,and real people usually tend to overestimate their abilities.With the rapid development of behavioral psychology in recent years,the irrational behavior of the managers especially managers overconfidence psychological economic consequences caused by starting to get the attention of the academia is the most widely,therefore,a growing body of research literature began to explore the psychological characteristics of managers overconfidence that managers variables influence on management of the research object,so the fee to asset managers overconfidence will produce what kind of impact? What is the transmission mechanism of this effect?In order to answer these questions,this paper selected relevant data of a-share listed companies in Shanghai and shenzhen from 2013 to 2017 as samples and conducted the following research: first,it explored the impact of managers’ overconfidence on audit fees.Based on the limited manager theory,this paper puts forward the view that the overconfidence of managers exists in general.On this basis,the paper analyzes the impact of the overconfidence of managers on audit expenses by using the signal transmission theory and the insurance theory.The empirical results show that managers overconfidence significantly improved the company’s audit fees.Secondly,in order to explore the mediating effect of accounting conservatism on the impact of managers’ overconfidence on audit expenses,this paper,based on the test method of the mediating effect of wen zhonglin et al.(2004),combined with the control illusion theory and debt contract theory,respectively verified the mediating effect of managers’ overconfidence on accounting conservatism and accounting conservatism.The empirical results show that the overconfidence of managers significantly reduces the level of accounting conservatism of the company,and accounting conservatism also plays a significant mediating effect in the process of the overconfidence of managers affecting audit expenses.In order to increase the robustness of the empirical results,this paper also conducted a lag phase treatment and Heckman test on the overconfidence of managers to control the effects of lag effect and self-selection problem respectively.Finally,Suggestions are put forward from three aspects: strengthening internal governance,introducing external supervision and establishing a reasonable recruitment,evaluation and training system.The innovation of this paper lies in: on the basis of verifying that the overconfidence of managers will significantly affect the audit cost,this paper attempts to further explore the mediating effect of accounting conservatism on the process of the overconfidence of managers affecting the audit cost,which is rarely explored at home and abroad.