题目：Effort Allocation in Integrated Audits and Its Impact on Financial Reporting Quality

主讲人：Dr. Xinming Liu （台湾政治大学）

时间：2018年3月5日下午15:00

地点：主楼418

主讲人介绍:    

   Xinming Liu earned her double Bachelor degrees in accounting from Central South University and University of Wolverhampton (2011), Master degree in international accounting from City University of Hong Kong (2012), and Doctoral degree in accounting from National Chengchi University (2017). She has published paper in Asia-Pacific Journal of Accounting and Economics. Her research interests are varied and include Audit Committee, Corporate Governance, Director Incentive compensation, Internal Control, etc. 

内容介绍：

    China’s 2012 Rule mandates that listed firms should disclose their internal control (IC) audit fees in the annual reports. Using abnormal audit fees to proxy for over- or under-investment in audit effort, China's new rule provides a unique setting in which we can distinguish auditor's effort allocation in an integrated audit. This study examines whether IC over-reliance exists and whether this over-reliance leads to lower quality of financial statement (FS) audits. An IC over-reliance exists if auditors' over-invested effort in IC audits cannot actually help them detect IC weaknesses (ICW). Because the auditors mistakenly believe that over-investment in IC audits can detect more ICW, they will under-estimate firms' control risk, resulting in reduced substantive testing and lower FS audit quality. Based on a sample of 4,265 firm-year observations from the A-share companies listed on China’s stock exchanges during 2012-2016, we show that IC over-reliance exists and harms financial reporting quality when auditors charge positive abnormal IC audit fees and negative abnormal financial statement audit fees. However, this negative effect of IC over-reliance is mitigated when the auditors are IC industry experts. These results are robust to controlling for endogeneity, alternative measures of FS audit quality and abnormal audit fees, deleting observations with small abnormal IC and FS audit fees, and validity test of the effort over-/under-investment classifications. Our empirical results bear important implications to recent regulations and standards.

（承办：会计系、科研与学术交流中心）