Audit fees, motivation of avoiding loss and opinion shopping : Test for moderating effect based on evidences of Chinese stock market from 2001 to 2008

Purpose – The purpose of this paper is to empirically analyze the impacts of motivation for avoiding loss and actual abnormal audit fees on management behaviors of audit opinion shopping. Design/methodology/approach – Using empirical research methods, this study employs regressive models and moderating effect models with data from Chinese listed companies from 2001 to 2008. Findings – By analyzing the empirical data, it is found that strong motivation for avoiding loss has a certain moderating effect on the relationship between abnormal audit fees and audit opinion shopping; abnormal descent of audit fees significantly increases both the likelihood of receiving modified audit opinions of annual financial reports and that of the improvement of audit opinions; listed companies reporting consecutive losses in the last two years have a higher likelihood of an improvement in unfavorable audit opinions because of stronger motivation for avoiding loss and audit opinion shopping of management; and strong motivation for avoiding loss has a significant moderating effect on the relationship between abnormal increase of audit fees and audit opinion shopping. Practical implications – This study has a significant practical implication for market supervisors, small and medium investors. Originality/value – The paper classifies abnormal audit fees into abnormal increase and descent of audit fees, and audit opinions differences into the improvement and deterioration of audit opinions, and further empirically analyzes and verifies the moderating effect of motivation for avoiding loss on the relationship between abnormal audit fees and audit opinion shopping.