Product Market Competition,Internal Control And Audit Fees

Auditing service is conducive to the healthy development of the capital market.It also actively promotes the effective transformation of the economy and plays a pivotal role in the capital market of China.At this stage,in order to strengthen the supervision of audit services and regulate audit pricing,the regulatory agencies have successively issued a series of policies.However,unfair competition with low prices still exists in the audit market.How to fix a rational price is urgently needed to be resolved.When scholars explore the factors of audit pricing,they often focus on the company or accounting firms.The external environment is often ignored,such as product market competition,legal provisions,economic and politics.With the continuous development of economic globalization and the reduction of trade barriers,product market competition worldwide has become increasingly fierce.It can not only promote the company's product,but also realize the effective allocation of resources.As one of the external factors affecting the company's operation and management,whether product market competition will affect audit fees is rarely studied.In addition,this paper creatively adds internal control quality as a mediator variable to study how product market competition affects audit fees.This paper combines of theoretical research and empirical research.Firstly,this paper reviews domestic and foreign literature on product market competition,internal control,and audit fees.Secondly,based on principal-agent theory,industrial organization theory,governance theory of product market competition,and insurance theory,this paper theoretically expounds how the two dimensions of product market competition affect the quality of internal control and audit fees.It also studies how these two dimensions affect the audit costs through internal control quality.Then this paper proposes research hypotheses.At the same time,the paper chooses samples of the data of A-shares listed companies from 2013 to 2017.The study found that the two dimensions of product market competition,the intensity of competition and the competitive position of the company,are significantly negatively correlated with audit fees.In addition,the intensity of industry competition and the competitive position of the company position will reduce audit costs by improving the quality of internal control.Finally,this paper presents recommendations for listed companies,regulators,and accounting firms according to the conclusions drawn from empirical research.It also explains the shortcomings and future prospects of this paper in the end.