Audit Firm Change, Initial Audit Fee Discount and Audit Quality

Abstract

Abstract:

This paper chooses Chinese A-share listed firms in 2007-2014 to explore whether initial audit fee discount occurs in different situations of audit firm change and the impact of this phenomenon on audit quality. Empirical results show that after controlling for the effects of audit firm merger on audit fees and audit quality, initial audit fee discount occurs not only when the audit firm and two signing auditors change simultaneously but also when the audit firm changes with one or two signing auditors remaining the same; the initial audit fee discount in the former situation impairs audit quality while the fee discount in the latter situation doesn't. Further research suggests that after removing the samples of audit firm merger, the conclusion is still valid; initial audit fee discount is still significant in the first year after the audit firm and two signing auditors change simultaneously; the removal of modified audit opinion is more likely when the audit firm and two signing auditors change simultaneously along with initial audit fee discount. This paper has some theoretical and practi-cal importance for maintaining relationship with audit clients, guaranteeing audit quality and developing audit profession.

Key words: audit firm change, signing auditor change, initial audit fee discount, audit quality, audit firm merger

Zhang Rui, Tian Gaoliang, Qi Baolei, Han Jie. Audit Firm Change, Initial Audit Fee Discount and Audit Quality[J]. , 2018, 30(2): 183-199.

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