How China's Company Finances Affect Audit Costs

China's economy is facing a big challenge: companies are becoming more focused on financial assets. This study looked at how the length of time companies hold onto these assets affects their audit fees. Using data from Chinese companies listed on the A-share market between 2009 and 2019, the researchers found that companies holding onto financial assets for a long time tend to pay more for audits. Short-term assets didn't seem to make a difference. The study also found that the financial risk these assets pose can influence the audit fees.

Independent directors, who are supposed to keep the company in check, also play a role. Companies with more female independent directors or those with finance backgrounds pay less for audits. Surprisingly, directors with overseas experience or academic credentials make the audit fees go up. The size of the company and its financing situation can also change how these factors affect audit fees. This study helps us understand why some companies pay more for audits and what makes financial assets risky.

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