Annual Risk Information, Internal Control And Auditor Decision

In order to reduce their own litigation risks,auditors gradually pay more attention to the early warning risks of enterprises and attach more importance to the overall risk assessment of enterprises.However,most existing studies focus on the impact of historical financial information on transaction changes.Even if some scholars judge auditor behavior decisions by predicting future risks of enterprises through models,the basic data are still past financial indicators,and the accuracy of model fitting needs to be considered.The management report in the annual report discloses the opportunities and challenges of the enterprise’s future development based on the changes of the external economic environment and the enterprise’s business strategy,and can "warn"the future risks from an overall perspective.However,the existing research lacks attention to such unstructured information.Therefore,the primary question of this paper is:can auditors take advantage of the early warning function of risk prompt information to change the behavior choice of accounting firms in the audit relationship?In addition,considering the balancing effect of the system on contractual relations,internal control as a governance mechanism can have a significant impact on both audit subjects,so this paper further raises the question:Does internal control play a moderating role between risk warning information and accounting firm change behavior?If so,how does this regulation occur?Finally,consider the particularity of the audit market in China,the strong competitive environment lead to companies and firms in a unfair trading position,different sizes of firms cannot form a unified quality control audit risk standard,leading to the different work by auditors acceptance of risk information,evaluation of risk warning information is different,Therefore,the question for further consideration is:what role do the subjects of different transaction status play in the dissolution of the audit relationship?Do larger firms have a bias towards breaking audit contracts in highrisk situations because they value reputation capital more?Based on this,this paper uses text mining technology to investigate the influence of risk warning information on the change of accounting firm,and the moderating(mediating)effect of internal control as a moderating variable,audit opinion and audit cost as a mediating variable.It is found that risk cues are significantly positively correlated with firm change,and high-quality internal control effectively inhibits the effect of risk cues on firm change,and this effect is(at least partially)mediated by audit opinion/audit fee.In addition,after grouping the change types of accounting firms,it is found that there is a positive correlation between risk prompt information and the change behaviors of accounting firms dominated by different subjects,and the positive correlation between risk prompt information and the change behaviors of ordinary firms to the "local eight" is more significant.To sum up,auditor’s behavior decision is the result of the combined action of structured information and unstructured information,and risk warning information has important value in audit decision making.Therefore,attention should be paid to the perfection of unstructured information disclosure system,so as to give full play to its due information value.