Research On The Impact Of Goodwill Impairment On Audit Fees

For the past few years,the frequency of goodwill impairment matters in China’s capital market has led the regulatory authorities to introduce a series of policy measures,thereby strengthening the supervision of companies’ goodwill impairment and audit procedures for goodwill impairment.A number of accounting firms have been issued warning letters by the regulatory authorities for failing to adequately perform the audit procedures related to goodwill impairment.Therefore,during the period when goodwill impairment risks gather in China’s capital market,auditors need to pay due attention to and properly address the audit risks of goodwill impairment.The auditors’ response to audit risks will ultimately be reflected in audit fees of companies.Taking a sample of A-shares listed companies from 2014 to 2020,this article focuses on the impact of goodwill impairment on audit fees,and conducts a systematic study of the factors influencing the relationship between goodwill impairment and audit fees from three aspects:corporate governance structure,auditor technical characteristics and external environment.The study finds that:(1)goodwill impairment has a significant positive impact on audit fees of companies.(2)In the aspect of corporate governance structure,power balance with shareholder structure and executive shareholding have a negative impact on the positive correlation between goodwill impairment and audit fees.In the aspect of auditor technical characteristics,auditor industry specialization and audit tenure have a negative impact on the positive correlation between goodwill impairment and audit fees.In the aspect of external environment,marketization process has a negative impact on the positive correlation between goodwill impairment and audit fees.The implementation of class action system has a positive impact on the positive correlation between goodwill impairment and audit fees.(3)Further study finds that audit input(measured with audit delay)partially mediates the relationship between goodwill impairment and audit fees.The negative impact of auditor industry specialization on the relationship between goodwill impairment and audit fees is more pronounced in industries where goodwill impairment is prominent.The above findings broaden the research on the relationship between goodwill impairment and audit fees,and provide useful references for companies,auditors and regulatory authorities to properly address the risks associated with goodwill impairment.