a topic of considerable research interest (Liu and Hu, 2006). Auditors themselves have also begun to attach
greater importance to evaluations of internal corporate governance. On 15 February 2006, China’s Ministry of
Finance announced the issuance of new auditing standards. These standards implement a risk-oriented audit
approach that attaches importance to the risks associated with a firm’s governance structure. Auditing Standard
No. 1211 states clearly that auditors must pay attention to the governance structure of the audited entity.
However, it remains unclear whether corporate governance has any effect on audit fees and, if it does have
such an effect, how it influences audit fees.