Product Market Competition and Audit Fees-Evidence from China

• Main Authors: Cheng-YenHsieh, 謝承諺
• Other Authors: Yu-Ting Hsieh
• Format: Others
• Language: zh-TW
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/9bj44f

碩士 === 國立成功大學 === 會計學系 === 104 === This paper investigates the relation between market product competition and audit fees. In this study, I use industry concentration, product substitutability, and market size as proxy variables of product market competition. Analyzing China’s publicly traded companies from 2002 to 2014. The results show a positive relation between market product competition and audit fees. This means auditors charge higher fees to firms in more competitive industries. It supports that when a firm is in a more competitive industry, it faces higher risk of bankruptcy. If firms declare bankruptcy, they will not only be accused of mishandling their business but their auditors will be as well. According to deep pocket theory, if clients fail, investors will sue audit firms for compensation. In order to offset this risk, auditors will intend to charge higher audit fees. I also find if a firm trades on the Shanghai Stock Exchange, the effect of market product competition and audit fees will be more violent. This is because that most firms on the Shanghai Stock Exchange are large companies, and the competition between large companies tends to be fiercer. For this reason, the business risk is higher, and auditors will thus charge higher fees.