Special Key Audit Matters,Price Competition And Audit Fees

When auditors disclose special key audit matters,they need to take higher audit costs and audit risks.Therefore,auditors will increase audit fees.However,because of low concentration and fierce competition of the audit market in China,audit firms generally adopt ‘low balling’ strategy to attract customers.When companies change audit firms,they will adopt ‘low balling’ strategy to obtain audit business relationships.Considering the differences between different types of key audit matters,it is found that non-income special key audit matters are more difficult to imitate and learn from,which means greater audit investment and audit risk,which are better indicators reflecting audit costs.Using the policy of key audit matters as a research opportunity,this article explores how the increase in audit fees caused by the disclosure of special key audit matters is affected by the ‘low balling’strategy of audit firms.Through the empirical evidence research of China’s A-share listed companies from2017 to 2020,it is found that when audit firms adopt ‘low balling’ strategy to obtain business relationships,the increase of audit fees will be suppressed,and the costs and risks brought by disclosing special key audit matters cannot be reflected in the audit fees.Only when without ‘low balling’,the increase of audit cost of special key audit matters will be reflected in the audit fee.Considering the differences in bargaining power of audit firms,it is found that when audit firms have no brand effect,no industry expertise or whose customers located areas with high degree of marketization,the ‘low balling’ is severe,and the increase of audit fees brought by disclosure of special key audit matters will be suppressed.Finally,the robustness test is carried out for the test results,which are consistent with the previous ones.