Study on the Influence of Annual Report Inquiry Letter on Auditor Behavior

Abstract

As a non-penal regulatory tool, the annual report inquiry letter exerts effects that influence the decision-making processes of both auditors and corporate management. Using a sample of A-share listed companies on the Shanghai and Shenzhen stock exchanges from 2016 to 2024, this study empirically examines the impact of annual report inquiry letters on auditor behavior through three dimensions: audit fees, audit opinions, and auditor changes. The results indicate that companies receiving inquiry letters face significantly higher audit fees, are more likely to receive non-standard audit opinions, and exhibit a significantly increased probability of auditor change. These findings collectively demonstrate that regulatory inquiries influence the operational mechanisms of the audit market by enhancing information disclosure quality and strengthening auditors' risk perception. This study provides valuable insights for optimizing auditor decision-making, improving regulatory effectiveness, and enhancing the quality of information disclosure in listed companies.