Can climate-related risks increase audit fees?–Evidence from China

Abstract

In this study, we investigate whether the audit fees would be affected by the firms’ climate-related risks. Using physical climate risks and transition climate risks indicators, we find that climate-related risks can significantly raise audit fees, and this finding still robustness on instrumental variables, replacing audit fees measure, and firm fixed effects model. Furthermore, potential mechanism demonstrates that climate-related risks increase audit fees by the media attention. Finally, the further analysis reveals that the energy firms, state-owned firms and large firms with climate-related risks have a more significant impact on audit fees than non-energy firms, non-state-owned firms and small firms.