Globalizing The Boardroom,Management Rights And Audit Fees

Supervisory function is one of the main and important functions of the board of directors.Effective board supervision can curb financial fraud.In recent years,financial scandals emerge in endlessly,like Enron Event and Kangmei pharmaceutical fraud.All this indicates a degree of failure of the board’s supervisory function.How to improve the supervision efficiency has become a hot topic.In recent years,with the deepening of economic globalization,the connection of China with the world have become more and more frequent.On the one hand,the implementation of the “going out” strategy has made the recruitment of foreign employees a demand.On the other hand,the implementation of the “Overseas High-level Talents Introduction Program” has attracted a large number of overseas talents to work in China.More and more foreign directors appear in the board of directors.Due to the different growing environment,there are significant differences between foreign directors and domestic directors in terms of culture and behavior.According to the research of previous scholars,globalizing boardroom can improve the supervision efficiency effectively.On the other hand,as an external supervision mechanism,CPA audit can provide reasonable assurance through the fair expression of the financial statements,so high-quality external audit can effectively supervise the manager’s financial fraud.Under the same scale,the higher the audit fee,the higher the quality of the audit work.Due to the characteristics,globalizing boardroom will require CPA to provide high quality work to assist them,which eventually lead to an increase in audit fees.In modern enterprises,ownership and management rights are separated.In order to solve the problem between principal and agent,the owner entrusts the board of directors to supervise managers.We know strong managerial power will weaken the supervision and restraint.Therefore,it is worth exploring the influence of management power on the relationship between globalizing boardroom and audit expenses.This paper discusses the relationship between the globalizing boardroom,the power of managers and the cost of auditing.First of all,based on principal-agent theory,stakeholder theory,resource dependence theory and insurance theory,this paper theoretically analyzes the relationship between these three variables,and proposes the hypothesis.Second,we selected the data of Shanghai and Shenzhen a-share listed companies from 2010 to 2017 as samples,finally obtained 8,905 observed values.Third,we do a series of robustness tests to verify the reliability of the conclusions and also do some further analyzed.Finally,proposing the conclusions and suggestions.Research results show that:(1)Globalizing boardroom and the audit fee has significant positive correlation.In other words,the presence of foreign members can improve the supervision efficiency of the board of directors.Globalizing boardroom will not only improve its supervision role for managers,but also be willing to improve the supervision efficiency of the external supervision mechanism as a supplement.They will require the CPA to provide high-quality audit work,thus improving the audit cost level of the company.(2)The stronger power of the company’s managers,the less significant the positive correlation between globalizing boardroom and audit expenses.That is,the stronger power of the managers,the lower the supervision efficiency.They are not inclined to look for external supervision mechanism as a supplement.(3)In poor institutional environment,the globalizing boardroom and the audit fee has significant positive correlation,but not significant in good institutional environment;There is a significant positive correlation between the internationalization of independent directors and audit expenses,while there is no significant correlation between the internationalization of non-independent directors and audit expenses.The research significance of this paper is as follows: broaden the relevant research on the globalizing boardroom,enrich the relevant literature on audit fees,and have certain policy and practical guidance value for improving the governance level of the board of directors and audit practice.