Oil price uncertainty and audit fees: Evidence from the energy industry

Abstract

This study examines how oil price uncertainty, measured by implied volatility, affects audit fees. Using samples from the energy industry, we find that oil price uncertainty increases audit fees. Furthermore, the mechanism analyses demonstrate that the increase in audit fees is driven by the increased audit effort rather than a higher audit risk premium. Additionally, the positive impact of oil price uncertainty on audit fees is more pronounced for non-state-owned firms, firms with weaker corporate governance, and firms with greater earnings manipulation risks. Finally, our main finding remains robust for oil price uncertainty measured by Shanghai Crude Oil Futures and West Texas Intermediate.