Abstract
Start-up companies are confronted with various risks and many uncertainties, and professional auditing can fully analyze start-up companies. In this way, both parties may maximize their interests through auditing the market activities. Based on the characteristics of start-up companies, this study explores the impact of customer psychological prices on audit pricing. The impact of customer psychological prices on audit pricing decisions was systematically analyzed from various angles, thereby determining whether it will affect the development of the product market. The results show that product market dominance reduces the agency costs between the owner and manager of the customer company. In other words, if the customers have greater control over the product market, they will have a lower business risk, and the auditor risk will be reduced accordingly, hence a lower audit fee. In the start-up company market, even if the financing dilemma restricts the survival and development of the company, customers still have psychological expectations for audit pricing. When their psychological price of products is different from the market price of products, it may affect the market advantage of products with lower audit fees, and further expands the previous research. In the market, customers also have certain psychological expectations for “auditing” products. Therefore, strengthening the relationship between auditors’ pricing and customers’ psychological prices has a positive effect on enhancing the competitiveness of product markets, which also increases the operating efficiency of start-up companies.
Highlights
Since China joined the World Trade Organization (WTO) in 2001, Chinese companies have faced competition from the domestic market and participated in the fierce competition in the international market (Tsao et al, 2017)
This study aims to expand the information of customers on the establishment of audit prices, systematically analyze the impact of customer psychological prices on company pricing decisions from various angles, and enrich the role of customer bargaining power in the relationship between product market power and audit pricing
An accounting firm can be regarded as a party providing audit services, and a listed company can be regarded as a party receiving audit services
Summary
Since China joined the World Trade Organization (WTO) in 2001, Chinese companies have faced competition from the domestic market and participated in the fierce competition in the international market (Tsao et al, 2017). Scholars believe that companies with competitive advantages in product market power can continue operations and set up barriers for potential new entrants, thereby reducing agency costs between managers and shareholders. At the initial stage of their life cycle, start-up companies do not have adequate funds and resources, leading to a low market share, small production scale, insufficient profitability, and certain financial difficulties. In this case, professional audit services can issue reasonable audit report opinions on the financial statements of the companies, avoiding the risk of lawsuits of start-up companies (Su et al, 2019)
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