As an integral part of corporate governance, assurance services from internal and external sources supervise and evaluate companies’ operations. Systematically combing the relevant internal and external audit literature at home and abroad reveals that internal auditing and audit fees show different relationships in different countries and markets. The objective of this study is to examine the relationship between internal audit quality and audit fees in the Chinese market. This study takes companies which constitute the China Securities Index 300 (CSI 300) as a sample, and analyze data from 2013 to 2020 to examine the relationship between internal audit quality and audit fees by using regression analysis. Regression results show that companies with a higher quality of internal audit function pay more external audit fees at the same time. Results provide some suggestions to improve the audit supervision mechanism of Chinese listed companies and can enrich the research on internal control and external supervision.

Keywords: Internal audit, external audit, audit fees, corporate governance