A Study of Regulating Audit Fee Floor
Date Issued
2004
Date
2004
Author(s)
Hsu, Ente
DOI
zh-TW
Abstract
Audit fee floor typically refers to a government-imposed restriction on CPA attestation fee that must not below a particular level. This dissertation is the first article to study audit fee floor regulation in the analytical audit literatures. While trying to establish a theory on regulating audit fee floor, I examine the determinants of audit fee level, and explain why some characteristics of audit fee engender inconsistent conclusions in empirical research evidences. I also use both market competition and information signaling games to analyze the relationships between regulating audit fee floor and the audit quality respectively. Then I analyze the possible effects of regulating audit fee floor on audit market and social welfare, and I also suggest some related mechanisms if governments try to implement this proposed policy. Although regulating audit fee floor is not implemented in the other nations at the present time, in this dissertation I show that this regulation will be able to promote CPA’s audit quality and to raise credibility of corporate financial information under some particular conditions.
This dissertation includes the following four parts: First, I use a market competition game to analyze the audit market equilibriums, and then classified audit markets into some different types. I also study the determinants of audit fee level. I find that different audit market types will possess different audit fee levels. By observing the variety in determinants of audit fee level, I further explain the possible causes for the following phenomena of the audit markets. The empirical research could not prove that low balling does appear in audit market, or audit quality and audit fee have a positive relationship. Moreover, some audit literatures discovered that different nations incur different audit fee levels. Finally, audit fees do change over time, but it is not related to economic development or consumption level.
In the second part of this dissertation, I analyze the possible economic effects of regulating audit fee floor in a securities transaction market without compulsory attestation regulation. I conclude that it will induce different influences on audit quality, audit efficiency and social welfares if government regulates audit fee floor at different levels in different audit market types. This conclusion will be useful for government to regulate audit fee floor in the following situations. (1) It is helpful for government to choose a proper audit market type to regulate audit fee floor. (2) It provides government to decide a proper audit fee floor level. (3) It explains why audit fee floor was not implemented in all countries.
In the third part of this dissertation, I prove that we are unable to guarantee CPA’s audit quality if government regulates audit fee floor alone in a securities transaction market with compulsory attestation regulation. Only when government combines audit fee with legal liabilities and some related measures, then there is positive effect for regulating audit fee floor on audit quality, audit efficiency and social welfares.
In the final part of this dissertation, I use an information signaling model to analyze the relatiohship between regulating audit fee floor and audit quality in a securities issue market under compulsory attestation regulation. I also prove that there is positive effect for regulating audit fee floor on audit quality if government combines audit fee with legal liabilities.
Subjects
訊息傳遞賽局
審計品質
市場競爭賽局
審計公費下限
強制簽證
compulsory attestation
market competition game
information signaling model
audit quality
audit fee floor
SDGs
Type
other
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