"Most companies would favor that fines as a penalty of not complying with regulations about proper disclosure should be raised to prevent accounting fraud from occurring again. They also think that fees paid to audit firms should increase as tight regulation on financial statements has been imposed on listed companies. Hence these changes would enhance the transparency of accounting disclosure and financially support audit firms; companies also benefit more than costs and burdens they suffered."

​

Let’s write three reasons of the critique above.

The author has a premise that increasing fines or more punishment is an incentive for corporations to act prudently about financial disclosure. Still, the premise may be invalid judging from corporate activities. In recent years, corporations recognize the importance of proper disclosure regarding corporate social responsibility and investor relations. Raising fines is less important than these activities. Punishment may play a minor role in making corporations comply with disclosure rules.

The argument relies on an invalid assumption that corporations can afford to pay higher audit fee and interpret it as an incentive to proper disclosure. Not all corporations possess ample funds for audit. If the cost of auditing rises, some companies can pay the expenditure though others might be unable to do so. If I were CEO, I would decide to spend financial resources on projects or investments, not on administrative tasks. Thus, audit fees may not lead to the incentive for disclosure.

Though increasing audit fees might support auditing firms, there can be another essential point from which audit firms benefit. The audit quality does not always correlate with the audit fee paid. If anything, sufficient time for auditing and cooperation corporations provide for auditing firms is indispensable. The argument does not provide evidence on the relationship between lifting auditing fees and the expected merits created by the change.

​​