Abstract
We examine the audit pricing of terrorism. We find that in terrorism-intense countries, auditors charge higher audit fees. A similar result is obtained using the September 11, 2001 terrorist attack in the US as a quasi-natural experiment. These findings suggest that auditors incorporate terrorism into risk assessment and charge a fee premium accordingly. Cross-sectional analyses reveal that shareholder litigation strengthens the impact of terrorism on audit pricing. However, such an impact weakens as client importance increases. Finally, we show that in terrorism-intense countries, auditors are more likely to issue non-clean opinions. We conclude that auditors price terrorism.
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