Impairment Of Goodwill, Media Concern And Audit Fees

Since 2013,the M&A boom has accumulated 1.3 trillion goodwill in A-share market.With the expiration of three-year performance commitment,many enterprises report goodwill impairment due to their performance not meeting expectations,the total amount of goodwill impairment in 2018 has exceeded 160 billion yuan.The risk of goodwill impairment has started to surge.As the economic transition keeps going on,the economic growth gradually slows down,enterprises have to face severe performance pressure.Plus the outbreak of the SARS-CoV in 2020,which crashed many industries’ performance expectation,the risk of goodwill impairment in the forthcoming years should not be underestimated.On the other hand,as an integral part of the corporate governance system and the information transmitter in the market,the external governance function and information transmission function of the media are paid more and more attention by academic research.On the basis of sorting out and studying the previous literature,based on the risk premium theory and cost-benefit theory,combined with the principal-agent theory,this paper analyzes and summarizes how the existence of goodwill and the occurrence of goodwill impairment affect audit fees;combined with agenda setting theory and information asymmetry theory,this paper analyzes and summarizes the way that media concern affect audit fees and the relation between goodwill impairment and audit fees.Based on these logical frameworks,this paper raises related hypothesis.This paper takes all data of the A-share listed companies in 2013-2018,when the peak period of M&A lasts,as the overall sample for empirical research,and the research conclusions are as follows:(1)The existence of goodwill is positively related to audit fees;for enterprises with goodwill,the occurrence of goodwill impairment is positively related to audit fees.Further research shows that,due to the value volatility of goodwill and the inter period nature of earnings management behavior,the impairment of goodwill in this year not only increases the audit fees in this year,but also significantly increases the audit fees in the following year.(2)The media can play the role of information transmission.The positive emotions of the media will weaken the auditor’s risk expectation and reduce the audit fees.The negative reports of the media will improve the auditor’s risk expectation and then increase the audit fees.(3)Due to the joint effect of the information transmission function and the external governance function of media reports,the number of positive media reports has a weakening effect on the "positive correlation between goodwill impairment and audit fees",while the negative media reports have no significant effect on the correlation between them.Further research shows that the external governance function of media reports is strengthened in areas with moderate marketization,and the positive media reports have a more significant weakening effect on the correlation between goodwill impairment and audit fees.Based on the conclusions above,this paper gives policy suggestions on the optimization of goodwill measurement standard,the utilization of media functions and the improvement of audit fee mechanism.There are three aspect of innovative value in this study: First,by decomposing media sentiment and media reports into positive and negative aspects,this paper analyze three ways of media’s influence on audit fees in detail.Second,we test the influence of media information transfer function on audit fees separately by setting reasonable variables of media sentiment.Third,based on the previous research results and the conclusions of this paper,this paper explores the relationship between goodwill impairment and audit fees in next year;further,on the assumption of inverted U-shaped relationship between the degree of marketization and the external governance function of media,this paper discusses the influencing factors of the external governance function of media.