Do auditors care about what retail investors say? Evidence from China

Abstract

Using China's stock forum postings from 2008 to 2020, we document that when client firms exhibit pessimistic investor sentiment, auditors exert greater effort and charge higher fees from those clients. This increase in audit fees is attributed to the downward pressure on stock prices and the elevated litigation risk of the clients. We also reveal that the impact of pessimism on audit fees is stronger for firms with more widespread pessimism, those audited by larger audit firms and auditors with higher rankings, and those with a greater retail investor influence.