On the accounting firm of industry-specific pricing, investment and audit

[Abstract] 2001 - 2009 by China's first public offering of securities of the audit data for model checking and found that the Chinese initial public offering of securities of the audit, the auditor Industry specialization through the implementation of the competitive strategy of differentiation audit fees for a premium, and thus reap excessive profits, Industry-specific path of development can become an accounting firm effective competitive strategy.

[Keywords] initial public offering of securities of the audit market, audit pricing; accounting firm Industry specialization, audit fee premium
I. Introduction and background analysis system
In developed countries, the audit market in an increasingly competitive Industry, making the specialized accounting firm will act as a competitive strategy of differentiation and many scholars believe that Industry-specific Investment will increase the market share of accounting firms, accounting firms and to improve audit quality This article is concerned, in our initial public offering of securities of the audit market, accounting firms are also the industry-specific Investment, industry experts in order to play? If the accounting firm played an industry expert to audit fees is to improve ?
CPA in the more developed Western countries, the audit market structure evolution is becoming increasingly concentrated as early as in 1932, the AICPA's list will highlight the "Eight" accounting firm's strong position as at the end of 2002, "four big "accounting firms in the U.S. audit market share of 78%, one important reason is that since the late 1980s," Eight "accounting firms began to take industry-specific path of development.

At present, China is undoubtedly the troubled accounting firm audit work hand in hand with the audit risk in the changing business environment, the changing capital market, in violation of technical means more and more "smart" in the accounting fraud , a spate of accounting firms audit failures In 2001, our transit handling the accounting firm's failure to understand Tianjin Guangsha "extraction" of industry knowledge, lead to audit failure; Lam AG, responsible for the audit of accounting Shenyang Warren company is due to the lack of industry knowledge and not from the gross margin, cash flow, industry, accounts receivable turnover and income determine the relationship between aspects of the performance of unusual aquatic To this end, since 1998, China issued a series of push accounting firm to expand the scale of policy, especially in March 2000 issued by the Ministry of Finance <<accounting firms expand the scale of a number of issues guidance>> and in June 2000 jointly issued by the Ministry of Finance and the Commission's << CPA implementation securities and futures-related business license regulations>> greatly promoted the process of merging accounting firms. Certified Public Accountants through the powerful combination of scale or form a group to expand and actively participate in international competition. 2005 China Certified Public Accountants issued a number of auditing standards of the draft, the draft has a lot of these covers the auditor's industry expertise, such as <<China Certified Public Accountants Auditing Standards No. 1631 - audit of financial statements in consideration of environmental issues>> explicit requirements for auditors in the audit report issued by the audited entity to pay attention to the industry environment. 2006 Ministry of Finance also issued a number of accounting standards, which <<Accounting Standards No. 3 - Investment Property >>,<< Accounting Standards for Enterprises No. 5 - Biological Assets "and <<Accounting Standards for Enterprises No. 27 - oil and gas>> the situation so requires attention to specific industries or industry specific issues. Thus, the audit regulatory policy has gradually industry expertise in the audit confirmed the important role of audit regulation also requires auditors to develop their own industry audit expertise .2007 May 26, China Association of Certified Public Accountants issued <<bigger and stronger on the promotion of the accounting firm's advice> > The comments made ready to use 5 to 10 years to cultivate a certain size of about 100, to large enterprises and enterprise groups to provide comprehensive services to accounting firms, and on this basis, about 10 foster cross-border operations to provide comprehensive services, international accounting firm. continued consolidation and scale of China's industry-specific accounting firm to go the path of development provides a potential possibility. So, in our initial public offering of securities of the audit market in the accounting firm is already the formation of a certain degree of industry specialization? industry-specific accounting firm can bring sustainable competitive advantage?
Second, industry-specific Investment and theoretical analysis of the audit fee premium
Industry-specific behavior takes the high cost of private Investment, for the accounting firm, is a sunk cost. In theory, it must require the corresponding returns, as opposed to non-specific nature of the other accounting firms, should pay higher, access to premium [1]. Shaked (Xie Kede and Sutton (Sutton establish and develop a vertical differentiation model, indicating that the enterprises producing higher quality products in order to charge a higher price and get more profits [2], but their model assumes that the quality of production without the cost, the production of high quality and low quality firms are the same unit cost of production and this assumption is too ideal, in reality, to provide different quality manufacturers in production costs may is different. To this end, we model was modified to allow accounting firms to provide different quality of the production cost is not the same assumption that the consumer spending a unit of audit products, the quality of  q ,  p  pay the price If the audit does not buy the product, or 0 on the quality of preferences parameters  θ , evenly distributed in   θ  > = 0 and  θ =  θ   +1 between the consumer population, Its density is 1.

Suppose there are two accounting firms, accounting firms  i  audit quality  q   i  , here  q   2 > q   1  , 2 accounting firm that specialized by industry Investment higher than 1 accounting firm's audit quality, so that Δ  q = q   2 -q   1  , that differences in audit quality, unit production costs for the accounting firm  C   i  .

So that the consumer's utility function  U :
 U = θq-p, if consumers buy quality q, the price for the products of p 
0, if the consumer does not buy
Assuming 1:   θ   ≥  2  θ  , the difference is large enough consumers.

Assumption 2:  C   2 -C   1   3Δ  q  +  2  θ -θ3 (q   2 -q   1 ) ≤  θ  q   1  ,  This ensures that the price equilibrium, the preferences of consumers will choose low-lower-quality audit products to market "is covered."
So that Δ  q = q   2 -q   1  , we first find a market to be covered, the two accounting firms compete for consumers' equilibrium Quality preference parameters   θ  consumers buy high quality audit product, quality parameters  θ  preferences of consumers to buy low-quality audit products if and only if θq   1 -p   1  = θq   2 -p   2  when , parameters θ of consumers will have two products  no difference solution was   θ  = p  2-p  1q  2-q  1 , therefore,   θ > p  2 - p  1q  2-q  1  consumers will buy high quality audit products  products, and  θ  <p  2-p  1q  2-q  1 consumers will buy low-quality audit products. As the parameter θ is uniformly distributed, and  density of 1, so we get two for the accounting firm's demand function:
 D   1  (p   1 , p   2  = p  2-p  1  Δ  q  -   θ   (1
 D   2  (p   1 , p   2  =  θ   -  p  2-p  1  Δ  q  (2
In the Nash equilibrium, each accounting firms  i  choose  p   i   to maximize profits  (p   i -c   i  D   i  (p   i  , p   j  .

Response function:
 p   2  = R   2  (p   1 ) = (p   1  + C   2  +  θ   Δ  q) / 2  (3
 p   1  = R   1  (p   2 ) = (p   2  + C   1  -  θ   Δ  q ) / 2 (4
Combining equations (3 and equation (4
Was  p   1  = 2C  1 + C  23 +  θ  -2  θ  3  Δ  q ,
 p  2 = 2C  2 + C  13 +2  θ  -  θ  3  Δ  q 
Demand for two accounting firms:
 D   1  = C   2 -C   1   3Δ  q  +   θ   -2   θ   3,
 D   2  = 2  θ  -  θ  3-C   2 -C   1   3Δ  q 
Further solve the two accounting firms to profit:
 Π  1 (q   1 , q   2 ) = 19 ( θ  -2  θ )  2  Δ  q +2 (C   2 -C   1 ) ( θ  -2  θ ) + (C   2 -C   1 )  2  Δ  q 
Links to free download http://www.hi138.com  Π  2 (q   1 , q   2 ) = 19 (2  θ  -  θ )  2  Δ  q +2 (C   1 -C   2 ) (2  θ  -  θ ) + (C   2 -C   1 )  2  Δ  q 
Therefore, to provide high quality audit and accounting firm providing products, low-quality products, the accounting firm audit the price difference:
 p  2-p  1 = C   2 -C   1  3 +  θ  +  θ  3  Δ  q 
Two profits of the accounting firm differences are:
 Π   1  (q   1 , q   2 )-Π   2  (q   1 , q   2 ) = 13 ( θ  -  θ )  2  Δ  q +23 (C   1 -C   2 ) ( θ  -  θ ) 
It can be seen from the model, the quality of the accounting firm the greater the degree of difference (Δ  q  greater the higher the price they charge, the higher the profits. In addition, different accounting firm price premium and profit, also depends on their production costs.

1. If the two accounting firms providing audit services to the unit cost of production equal to that  C   1  = C   2  , then, to provide high quality audit services to accounting firms 2 to provide low-quality audit services 1 accounting firm charged a higher price, but also earn more profits.

2. If the production of high quality audit products, the accounting firm 2 is higher than the cost of production of low-quality audit products, the cost of an accounting firm that  C   2 > C   1  , then we see, to provide high accounting firms audit the quality of the product 2 was significantly higher than the prices charged to provide low-quality audit products accounting firm 1, and the price difference between two accounting firms over the same unit cost more.

However, this time to provide high quality audit products accounting firm profits depends on the quality of consumer preference parameters, quality differences and differences in the cost of two accounting firms more.

When  ( θ  +  θ ) -2 (C   2 -C   1 )> 0, ie 0 <C   2 -C   1  < θ  +  θ  2, to provide high quality audit products accounting firm 2 is greater than the profits to provide low-quality audit products accounting firm  1.

When  C   2 -C   1 >  θ  +  θ  2 时 , even with high-quality audit products, the price of 2 higher than the accounting firm to provide low-quality products, accounting firms audit 1 But this time the accounting firm's profit is less than two accounting firms to obtain 1, which means that the product does not necessarily provide high quality audit accounting firm 2 to bring higher profits, providing high-quality accounting firm 2 audit products at the same time, we must control costs, the cost increase will be offset by large price increases brought about by the increase in profits when the cost of providing high quality audit products, the vertical differentiation will become unprofitable.

3, such as  If C   2  <C   1  , which provides high-quality products, the accounting firm audit the unit production cost is less than 2 to provide low-quality audit products, the production cost of an accounting firm, then provide high quality audit products, the profits of the accounting firm must provide significantly higher than low-quality audit products accounting firm 1, but to provide high quality audit products, prices and accounting firms to provide 2 low-quality products, accounting firms audit 1 The price difference is uncertain.

When   θ  +  θ > C   2 -C   1 , provide high quality audit products accounting firm 2's price p   2  than providing low quality products of Certified Public Accountants audit The price of 1 p   1 , and when  θ  +  θ  <C   1 -C   2  time, p   2  <p   1  .

4 vertical differentiation model that the industry, with industry-specific Investment behavior of the charges is higher than the accounting firm does not have industry-specific Investment, accounting firms, but higher costs are not conducive to the improvement of consumer demand, thus affecting the accounting firm's profit.  When C   2 -C   1 >  θ  +  θ  2 , the accounting firm will not be able to provide high quality audit products and provide access to lower than quality audit products, higher audit accounting firm profits. To this end, the accounting firm audit in improving product quality, to reduce costs.

Investment behavior of industry-specialized accounting firm profits can be achieved by the two the one hand, the accounting firm through higher Investment in industry-specific differences in the quality of the audit, but audit of fixed costs will increase, on the other , industry-specific investments to help reduce the marginal cost of the audit, therefore, the industry specialized accounting firm price behavior depends on both gain and profit trade-off, which makes have different industry-specific investment cost of the accounting firm of Price inconsistent behavior, can be higher than, or lower than the non-specialized accounting firm price if the investment behavior of industry-specific accounting firms to improve audit quality 2 in the same unit cost of the audit can be effectively controlled, that is, when  0 <C   2 -C   1  < θ  +  θ  2 , its price and profits will be higher than providing low quality audit accounting firm 1 if industry-specific accounting firm 2's unit cost of the audit can not be effectively controlled,  ie C   2 -C   1 >  θ  +  θ  2 , its price will be higher than the price of an accounting firm, But profit is less than 1 accounting firm, such accounting firm two pairs of industry-specific investment will significantly increase due to cost and unprofitable. When  C   2  <C   1   when Even if industry-specific investment is lower than the price of accounting firms accounting firms 2 l, price, its profits were greater than 1 accounting firm, a significant increase in demand at this time to make the implementation of industry-specific investment behavior of Certified Public Accountants 2 still profitable.

Empirical studies also confirmed the above model. Craswell (Claes Will the Australian audit market study found the industry-specialized accounting firm to charge higher audit fees [3]. Mayhew (Mayhew on the 1991 - 1997 U.S. IPO market study found that those who occupy the leading position in the industry and its market share is much higher than other industry-specific accounting firms accounting firms, charge a higher audit fees, while the remaining not the industry leader in specialized industry accounting firm's audit fees increase as the market share decline [4].

The theoretical model and empirical tests show that different accounting firm of investment industry expertise to help them get the audit fee premium is different with previous studies, we will be China's first public offering of the securities market, the accounting firm's audit industry expertise study of investment behavior, from the empirical point of view to verify the Chinese initial public offering of securities on the market if there is industry-specific investments of the audit premium relative to the annual report of the audit market, the initial public offering of securities of the audit market is a competitive audit market, which is much higher than audit fees on the annual audit of market fees, and accounting firms participated in a company once listed on the audit process, it is easy to establish long-term relationship with them, so each audit Teachers are very valued in this market segment. In addition, the annual report of the audit market in general, customers in the choice of auditor changes need to be considered when the cost of the initial public offering of securities in the market on the auditor's audit is the first time collaboration with customers, clients in the choice of auditor is not required to consider the cost of change, so the intensity of competition in the market is higher than the annual audit market.

III study design
(A definition of Research variables
1 dependent variable and the set
Since this initial public offering of securities in the market in the accounting firm's audit industry specialization and audit fees of the relationship, so this initial public offering of securities of the amount of audit fees of the natural logarithm as the dependent variable (LNAF.

LNAF for the initial public offering of securities of the amount of audit fees the natural logarithm.

2 experimental variables
SP is the test variable, when the company's annual financial report of the auditor for the industry industry experts Specialist = 1, and 0 otherwise, we will be in a particular industry's largest annual industry market share (the CPA firm in the industry the sum of total client assets audit of the industry combined ratio of total client assets) of the definition of the accounting firm's industry experts for the industry based on the above theoretical model, we expect Specialist positively correlated with LNAF.

3 control variables
(1 Customer scale audit the audit client's assets, the larger the expected initial public offering of securities of higher audit fees. Francis (Francis, who had Simunic using a modified regression model examined the Australian audit market, found that the size of assets of listed companies and reflect the transactions or matters listed companies, the complexity of the Economic variables (the number of subsidiaries was significantly associated with audit fees [5], we use the audit client before the last one listed on the end of the natural logarithm of total assets to reflect the size of audit clients. Links to free download http://www.hi138.com LNTA = audit clients, the last one listed before the end of the natural logarithm of total assets
(2 audit complexity.'s Initial public offering of securities the higher the complexity of the audit, the expected initial public offering of securities of higher audit fees. Annual audit fees commonly used in the audited annual audit clients have included the end of the consolidated statements of subsidiary of the complexity of the audit as a measure of the number of variables. consider our accounting firm for the initial public offering of securities of the company for 3 years or 3 years as an audit service, we use the listed companies during the initial public offering of securities owned by , consolidated subsidiary of the scope of the square root of the total number of initial public offering of securities to measure the complexity of the audit.

SQSUBS for listed companies during the initial public offering of securities owned, consolidated subsidiary of the scope of the total number of the square root.

(3 financial situation. Firth (Firth audit public companies through the New Zealand study found that factors affecting fees, receivables to total assets ratio is the impact of audit fees is one of the most important variable [6]. Simunic (Xi Mengke listing found company's assets-liability ratio is one of the factors affecting audit fees [7], so we set the following variables: ARTA = each end accounts receivable / total assets each period, AVARTA period for the initial public offering of securities each ARTA the arithmetic mean, INVTA = each closing stock / total assets each period; AVINVTA during an initial public offering of securities of each INVTA arithmetic mean, CURRATIO = each end of current assets / current liabilities each period, AVCURRATIO for the first time public offering of securities during the arithmetic mean of each CURRATIO, LONGDEBT = each end of the long-term debt / total assets each period, AVLONGDEBT during an initial public offering of securities of each LONGDEBT arithmetic mean.

(4) operating results. Simunic (Xi Mengke) found that the first two years of profits and losses of listed company audit fees associated with the condition [7], usually the actual profitability of listed companies, the higher the audit risk, the lower the expected initial public offering of securities of the audit charges the lower the listed companies generally consider the use of non-recurring profit to earnings management, regulation profitability, we use the profit after deducting operating other businesses to measure the return on operating results of listed companies.

ROA = (Operating profit each - each other business profit / total assets end of the period,
AVROA for the initial public offering of securities during the arithmetic mean of each ROA.

(5 signs of earnings management. Wu Lina study found that the performance of one of the company's earnings management, namely return on equity in the "security card" range, with the annual financial audit fees significantly negative correlation [8] sign is a measure of earnings management audit risk An important aspect, we refer to the Teoh (Teno initial public offering of such securities on earnings management Research using manipulate accruals to reflect the proportion of total assets signs of earnings management of listed companies. The larger the index, listed companies the more obvious signs of earnings management [9]. manipulate accruals for the calculation, we use the modified Jones model cross-section, the total accruals using the balance sheet method (because some of the company's cash flow statement is not part of the annual obtained, we can not use cash flow calculation manipulate accruals, non-manipulation of accruals is calculated by the following formula:
 NDA   t  = @   1  (1 / A   t-1 ) + @   2  ( Δ  REV   t  / A   t-1  + @   3  (PPE   t  / A   t-1  
On the type,  NDA   t   was  t  -1 after the first period end total assets adjusted first  t  period of non-manipulation of accruals, Δ  REV   t    is the first t  period income and  t  -1 difference between the income period,  PPE   t  is the first t  period to the end of the total plant, equipment and other fixed assets value,  A   t-1  is the first t -1  period end total assets,  @   1 , @   2 , @   3   different industries, different years of the characteristic parameters of its estimates based on the following model and industry groups through the use of regression of data obtained in different years.

 TA   t  / A   t-1  = a   1  (1 / A   t-1  + a   2  ( Δ  REV   t  / A   t -1  + a   3  (PPE   t  / A   t-1  + ε   t  
On the type , a   1 , a   2 , a   3  is @   1 , @   2 , @   3   the OLS estimates,  TA     t  is the period t total accruals, ε   t   for the remaining items on behalf of the company's total accruals in the maneuverability portion of accruals.

DAC = initial public offering during manipulate accruals / total assets end of the initial public offering
(6 auditor characteristics auditor or auditors of the scale of reputation of the audit fee is a certain effect. Francis (Francis and Stokes (Stokes by examining the largest and smallest of the 96 Australian non-financial listed companies audit fees found that for small listed companies, "Eight" accounting firm's audit fees than audit fees of other accounting firms is higher, that the "eight" accounting firm's audit fees than other accounting firms [ 10] well-known accounting firm or large accounting firms providing audit services to the relatively high quality, strong bargaining power, so expect higher audit fees, we will be the first public offering of securities of the audit market, the main Audit Certified Public Accountants is divided into two categories: the international "Big Four" accounting firms and non-"Big Four" accounting firms.

BIGAUD = 1 indicates an initial public offering of securities accounting firm audit the trial for the international "Big Four" accounting firms, 0 indicates the initial public offering of securities accounting firm audit the trial for other accounting firms.

(7 whether to provide other services accounting firms for the initial public offering of securities of the Company to provide audit services, may also provide public companies with earnings estimates, verification and other services to provide these services will not affect the first public offering of securities of the audit fees? this end, we designed two dummy variables:
FORCAST of 1 means the accounting firm during the initial public offering of securities to provide audit services to listed companies, while also providing earnings forecast for the services listed, 0 indicates that service does not provide profit forecasts.

VERIFY is an accounting firm, said in an initial public offering of securities during the audit services for listed companies, while also providing verification services for listed companies, 0 said did not provide verification services.

(8) the establishment of the company before the time listed. EXISTIME established for the company before the time listed.

(9 companies where the exchange. EXCAHANGE 1 that listed companies in Shanghai Stock Exchange listed company, 0 indicates that a listed company in Shenzhen Stock Exchange listed company.

(10 listed company's annual listing from the 2004 sponsor of China's listed companies to adopt the system, it would be underwriting an impact on costs and audit fees, we set the dummy variable YR1, said that it is a listed company is listed after 2004 company, is 0 for other listed companies listed company .2001 years ago, the annual listing of companies with the listing requirements of its listed companies after 2001 there is a big difference, we set the dummy variable YR2, said that it is a listed company 2001 years ago for the companies listed, 0 for listed companies since 2001 listed companies, listed companies in different years in order to distinguish differences in audit fees.

(11 listed companies in the region. Consider the different provinces of China's Economic level differences, where we will be divided into two listed companies, PROV 1 said the company located in Guizhou, Gansu, Qinghai, Ningxia and Shaanxi provinces outside for 0 company is located in Guizhou, Gansu, Qinghai, Ningxia, Shaanxi, and we expect more Economically developed regions of the initial public offering of securities to be higher than audit fees Economically underdeveloped areas.

(12 companies listed on the way. Part of the company prior to listing, usually asset restructuring or divestiture, in order to improve their performance, achieve regulatory requirements, the auditor will have to participate in the trial restructuring or divestiture of assets to help companies divestiture of assets, preparation of accounting entries and the corresponding financial statements due to spin-off companies is an important means of packaging (which is not observed on the report of the audit market and, therefore, before the asset restructuring of listed companies or spin-off its first public offering of securities of the audit effort and risk are higher than the pre-IPO restructuring without divestiture of assets of the company. Links to free download http://www.hi138.com REFORM 1 said the company prior to listing, restructuring or divestiture of assets, said the company is listed as 0 before restructuring or divestiture of assets is not.

(13 during the initial public offering of securities is a major purchase, sale, exchange assets of behavior some of the listed companies in initial public offering of securities may occur during a major purchase, sale, exchange assets of behavior, according to China Securities Regulatory Commission <<About major listed companies to buy, sell, exchange assets, a number of issues notice>> accessories requirements, major listed companies to buy, sell, exchange assets, securities business by a qualified accounting firm for the proposed purchase, sale, exchange relevant assets of the last three years the financial position and operating results of the audit report issued, which will undoubtedly increase the workload of the accounting firm audit and risk.

BIGCHANGE 1 that during the initial public offering of securities of listed companies have undergone major asset acquisition, sale or exchange, 0 indicates that no significant asset acquisition, sale or exchange.

(14) audit workload due to the initial public offering of securities of the audit is usually more than one year audit of financial statements, the auditor's annual audit of the workload is greater than the workload of the company's assets through a specific period of each accounting period the previous long-term accumulation, so the company's initial public offering of securities and listed assets at the end of the year after the end of the last two years the difference will not be great assets, so that we can better measure of a company's initial public offering with the Securities Audit and annual audit of the audit workload differences, while the main business income is usually extended with the company's increased business activities. For the CPA, the revenue part of the cost of production part of the audit and audit of financial statements constitute a focus of the work, the main business revenue in the initial public offering of securities during the year and the difference largely reflects the initial public offering of securities of the Audit and Annual Report the workload of audit differences, we use the initial public offering of securities during the main business income of the total / final initial public offering of securities of indicators to measure the total assets of the initial public offering of securities of the audit workload.

TURNOVER = initial public offering during the main business income of total / total assets end of the initial public offering.

(Two test models set
In this paper, Defond (Defu Te, Francis (Francis) and Wong (Wang et al model as a benchmark [11], to establish the following model:
 LNAF = b   0  + b   1  LNTA + b   2  SQSUBS + b   3  AVARTA + b   4  AVCURRATIO + b   5  AVROA + b   6  DAC +
b   7  BIGAUD + b   8  REFORM + b   9  BIGCHANGE + b   10  AVINVTA + b   11  FORCAST + b   12  VERIFY + b   13  EXISTIME + b   14  EXCHANGE + b   15  YR1 + b   16  YR2 + b   17  PROV + b   18  AVLONGDEBT + b   19  TURNOVER + b   20  SP 
(Three sample selection and data sources
We are a listed company from the prospectus to collect, collate the listed companies to disclose the 2001 to 2009 initial public offering of securities of the audit fee data.

In the initial public offering of securities of the audit fee data processing, we removed the following observations: First, there is no disclosure of audit fee data observations. Individual listed in the prospectus does not clearly disclose the initial public offering of securities of the audit fees, so excluding these observations. Second, the disclosure of service charges mixed data observations in the listing process, in addition to listed companies, initial public securities issued by the audit, but also need to submit a series of declarations, such as certified public accountants on the issuer's internal control system evaluation report, the accounting firm's verification report, the profit forecast reports in information disclosure, some observations may be disclosed the initial public offering of securities of the audit, verification, and mixed earnings estimates the amount of fees, were not disclosed. This observation is likely to result in samples
Between are not comparable, because the initial public offering of securities other than the special audit report on the audit fee pricing itself will interfere with the decision model (we can not work due to other special reports in the audit pricing model using the appropriate decision variable to be controlled Third, financial companies initial public offering of securities of the audit fee observations, because financial companies and other listed companies in the business and the risks are very different, so we exclude financial companies for the first time public offering of securities audit fee observations fourth, while issuing B shares and H shares of the company.

Based on the above procedure, we finally selected 254 cases of the sample companies, which employ an accounting firm for the sample companies in 2001 to 2009 initial public offering of securities of audited financial statements, and we can get the exact initial public offering of their securities audit pricing data.

(Four descriptive statistics
This according to China Securities Regulatory Commission promulgated in 2001 <<listed company industry guidelines on the classification>> of various industries, industry-specific auditor to identify, is divided into 21 industries (excluding the financial sector, manufacturing is divided by two, non-manufacturing divided by a) Table 1 shows the 1997 to 2009 the industry experts, industry market share (assets accounting firms and industrial customers account for all customers of the industry total assets ratio). Craswell (Claes Will such an industry market share is greater than 20% of the defined industry experts [3] can be seen from Table 1, more than 50% of industry experts, the industry market share greater than 20%.

Fourth, the regression results
Table 2 shows the audit pricing model for customers' least squares regression results adjusted R   2  of 31.2%, F statistics volume at 1% significance level, indicating a good fit with the model results by Table 2 shows, in the regression, SP coefficient is positive and the P value is 0.03, so the empirical results show that the initial public offering of securities in the audit market, the industry specialized auditors can implement the competitive strategy of differentiation audit fees for a premium, and thus reap excessive profits, which is consistent with our expectations, and investment in the industry, accounting firms specialized industry-specific investments by the market recognition.

In the control variables, the audit client's assets with initial public offering of securities of the audit fees of 1% significance level, which is the traditional audit pricing studies is the same, but the number of subsidiaries included in the scope of consolidation at 10% level was not significant, this may just set up with a listed company or listed, the small number of subsidiaries in the measure of audit risk variables, AVLONGDEBT Although the 5% significance level, but the sign is positive as expected the opposite. measure evidence of earnings management indicators DAC sign is positive, the 10% level is not significant, this may indicate that the initial public offering of securities is not sensitive to the risk of audit fees.

Variables to measure the size of the accounting firm BIGAUD sign is positive, the 1% significance level, which shows that China's international "Big Four" accounting firms in the initial public offering of securities of the audit market, the accounting firm received a higher than normal audit premium measure other service variables FORCAST sign is negative, the 10% level is not significant, which shows in the provision of audit services at the same time provide a profit forecast and no audit fees have an impact. variable VERIFY sign is positive in 10 % significant level, which shows that accounting firms in the initial public offering of securities while providing audit and verification services in the case, the audit fee pricing higher. EXCAHANGE to measure the variables listed on Stock Exchange symbol is positive, the 5% level significantly on this show that the Shanghai Stock Exchange listed company's initial public offering of securities pricing, higher audit fees. YR2 year variable is negative, the 1% significance level, which shows that companies listed prior to 2001 pricing audit fees significantly lower than the listed company since 2001.

V. Conclusions and policy implications
Industry specialization can be seen as a relative non-industry experts, auditors and sustainable competitive advantage, both can lead to differentiation capacity and can lead to economies of scale. The empirical results show that China's first public发行证券的审计市场中,行业专门化的审计师可以通过实施差异化的竞争战略获取审计收费溢价,进而获得超额利润,这表明在首次公开发行证券的审计市场上,行业专门化的发展道路可以成为会计师事务所行之有效的一种竞争战略.

本文的实证结果支持中国注册会计师协会近年来为鼓励会计师事务所规模化经营而做出的一系列政策安排.会计师事务所的规模化为其行业专门化的发展提供了重要的前提.如果会计师事务所能通过合并实现行业的整合,突出专家才能,这一方面将使得国内审计师有能力提供品质差异化的审计产品,从而在审计市场需求环境改善的过程中有所表现,另一方面与发展行业专长相伴随的规模经济卓越的经营效率表现出的高利润和低定价则意味着整个审计市场福利的增加.我国监管当局应当鼓励会计师事务所通过自身发展专门化经营来吸引客户,允许会计师事务所进行行业内的市场扩张,实现做大做强的目标,同时启示会计师事务所通过考察行业特征因素制定经营战略,以在市场竞争中取胜.

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CPA Firms Industry Specialized Investment and Its Auditing Pricing:
From the Perspective of chinas Auditing Market for Initial
Public Offering and Listing Stacks
LI Shuang1, LI Xiao1, ZHANG Yaozhong2, SUN Na3
(1. School of Accounting, Central University of Finance and Economics, BEIjing 100081, China;
2. School of International Auditing, Nanjing 210029, China;
3. Beijing Purple Light Measurement and Control Limited Company, Beijing 100084, China)
Abstract: By examining the model of related auditing data on Chinas initial public offering and listing stocks from 2001 to 2009, we find in the auditing of these shares, auditors of specialization acquire premiums of auditing fees through the competitive strategy of difference and make super profits. Thus we conclude that specialization can be an effective and competitive strategy.

Key Words: auditing market of initial public offering and listing stocks; auditing pricing; CPA firms industry specialization; auditing fees premium

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