ABSTRACT This article investigates whether signing auditors’ early-life famine experience affects audit quality. We rely on a sample of Chinese listed firms and show that signing auditors who have experienced great famine experience during their early life are more likely to issue modified audit opinions, indicating that these signing auditors can effectively enhance audit quality. Further, our results remain unchanged after conducting a series of sensitivity tests using alternative measures of signing auditors’ early-life famine experience and audit quality, adopting PSM method, two-stage Heckman method, and placebo tests. Moreover, firms with these signing auditors have high quality financial information, and these signing auditors have more audit input with high audit fees and more audit efforts. Additionally, this study also demonstrates that the positive impact generated by these signing auditors on the quality of audit services is stronger in subsamples with high client importance. Signing auditors’ later experience (major and professional experience) plays a mitigating role in the association between signing auditors’ early-life famine experience and quality of audits. Our findings also reveal that signing auditors who are born in urban areas attenuate the positive impact of between signing auditors’ early-life famine experience on quality of audits.

In this paper, we develop a dynamic signaling model to examine how audit fee structures shape accountants’ effort choices and reveal their intrinsic integrity. A firm hires an accountant whose type — rigorous or fraudulent — is private information and offers a contract combining fixed salary and performance-based pay. Each accountant selects an observable effort level that serves as a type signal. We derive the perfect Bayesian equilibria and identify conditions under which rigorous types distinguish themselves by exerting higher effort and when imitation occurs. When performance-based pay sufficiently differentiates between types, fraudulent types are deterred from mimicry, preserving audit integrity. Conversely, when base salary differences fall within critical bounds, pooling equilibria emerge — either fraudulent types mimic rigorous effort or rigorous types reduce effort to match fraudulent behavior. These results demonstrate that high audit fees alone do not ensure quality and that poorly calibrated incentives may encourage collusion. By highlighting the dual function of audit fees as both incentives and signals, this study advances contract theory under asymmetric information and offers practical guidance for designing remuneration schemes that foster audit quality and integrity.

Purpose This paper aims to examine the effect of compliance to mandatory corporate social responsibility (CSR) on audit fees in the Indian setting. Design/methodology/approach The sample consists of 1,291 Indian-listed firms that were mandated by Clause 135 of the Companies Act 2013 to spend 2% of their average three-year profits before tax as CSR expenditure. The period of the study is from 2015 to 2019. The authors use a fixed-effect regression model. In addition, the authors also use the Heckman Selection Model, controlling for potential self-selection, a difference-in-differences and the regression discontinuity design analysis. Findings The authors find that firms complying with mandatory CSR regulation had to incur high audit fees, and the effect is more pronounced for firms that did not have CSR activities before the mandatory CSR regulation. In addition, the authors also find that audit fees are higher for firms with higher levels of operating, business and financial reporting risks. Thus, the result supports the notion that auditors associate higher inherent risk with audit risk for firms that are forced to engage in CSR activities. Practical implications The findings are potentially informative to regulators and policymakers in India and in other jurisdictions that may be considering mandating CSR. Originality/value To the best of the authors’ knowledge, this is the first work that looks at how auditors react to the firm’s compliance with mandatory CSR policies. The authors show that for an auditor, CSR compliance is an aspect of audit risk and it has not been explored in the extant literature, as a regulatory intervention in the form of mandatory CSR spending is unique (first of its kind) in the Indian setting. Prior work focuses on CSR disclosure; however, the setup allows us to examine CSR spending mandated by regulation. Moreover, the authors also add to the literature on audit fee determinants.

ABSTRACT This paper examines the role of country‐level regulatory disclosure requirements in moderating the relationship between audit partner tenure and audit fees. Using a sample of publicly listed companies in Western Europe, our findings reveal that audit partners with longer tenure charge higher fees, reflecting their incremental contribution to the audit process. This fee premium is more pronounced in countries with weaker disclosure requirements, where companies pay 15.33% higher audit fees when compared to companies with stronger regulatory requirements, highlighting the critical role of audit partners' firm‐specific tenure in providing assurance about the credibility of financial information in such contexts. Additional analyses show that a new EU regulatory disclosure requirement had a positive effect on audit fees only in previously weak regulatory disclosure requirement settings, confirming the importance of audit partner tenure in explaining the high audit fee premiums. Overall, our study provides valuable insights for policymakers, practitioners and academics.

SUMMARY We investigate when companies copy auditors on SEC comment letter correspondence and whether copying the auditor affects comment letter resolution. We find that companies are more likely to copy the auditor when there is a need for the auditor's expertise (i.e., the SEC's comment letter references an accounting topic). Copying the auditor is associated with quicker company responses to the SEC, and copying a more experienced auditor is associated with quicker SEC responses. Copying more experienced auditors is also associated with a greater (lower) likelihood that the comment letter is resolved through a revision (restatement). Finally, with respect to potential mechanisms, copying the auditor is associated with clearer company responses, more references to accounting authoritative guidance, more references to previous phone calls with the SEC, fewer requests for extensions, and higher audit fees. Overall, our results suggest that companies benefit from copying the auditor in comment letter responses. Data Availability: All data used in the study are publicly available from sources cited in the text. JEL Classifications: M42; M48.

Purpose This paper aims to utilize the unique setting of Hong Kong to investigate whether the fee premium associated with abnormally high audit fees indicates compromised auditor independence or reflects additional, unobserved efforts that enhance audit quality. Design/methodology/approach Based on a sample of Hong Kong initial public offerings (IPOs) from 2009 to 2019, the study analyzes the association between abnormal audit fees and pre-IPO real activities manipulation (RAM). Findings The analysis reveals that auditors charging abnormally high fees are associated with reduced pre-IPO RAM, and that stronger investor protection regulations contribute to improved audit quality. Moreover, this study finds that a robust institutional environment can mitigate the effects of political influence on audit quality, which is particularly important for politically connected firms seeking cross-border listings. Originality/value Overall, auditors who charge higher fees within a strong institutional context provide superior IPO audit quality compared to their counterparts.

The Joint Structure of Adverse Audit Signals

This study examines the relationship between auditor supply capacity and audit quality in China’s A-share market, drawing on 2,878 firm-year observations from 2021 to 2023. Audit quality is measured by discretionary accruals (DA) estimated using the Modified Jones Model, with robustness checks using absolute discretionary accruals (AbsDA). The analysis incorporates four key auditor supply variables: audit fees, Big 4 affiliation, audit firm organizational capacity (CICPA score), and auditor tenure. Results show that higher audit fees and stronger organizational capacity are significantly associated with lower discretionary accruals, indicating enhanced audit quality through greater auditor effort and institutional resources. By contrast, Big 4 status and auditor tenure do not exhibit significant effects in this context. These findings highlight the importance of supporting appropriate audit pricing mechanisms and recognizing the role of organizational capacity, while also acknowledging the limited influence of reputational and tenure-based factors in improving financial reporting quality in emerging markets.

ABSTRACT Government accounting supervision plays a critical role in regulating corporate finances and promoting market transparency. Using China’s 2020 pilot policy on Regularized Government Accounting Supervision (RGAS) as a quasi-natural experiment, this study examines its impact on audit fees. Mechanism analysis reveals that RGAS increases auditors’ reputation costs by enhancing media coverage and analyst monitoring, resulting in higher audit fees. Further analysis shows that the policy-driven increase in audit fees effectively improves audit quality. This study offers empirical evidence of RGAS’s governance effects.

Audit quality remains a persistent concern in Indonesia, particularly due to recurring instances of financial statement manipulation that often go undetected by auditors. These manipulations highlight the urgency of understanding the key determinants influencing audit quality. The COVID-19 pandemic, which began in early 2020, exacerbated these issues, particularly in the property and real estate sectors, which experienced a sharp decline in demand and, in many instances, received going-concern audit opinions. This research examines how variations in CPA firm size, audit fees, firm size, and the length of the auditor engagement influence audit quality. Using a quantitative research approach, data were collected from secondary sources, including audited financial statements, audit reports, and annual reports of property and real estate companies listed on the Indonesia Stock Exchange (IDX) from 2019 to 2023. A purposive sampling method was used to select 31 firms, yielding 155 firm-year observations. Hypotheses were tested using descriptive statistics and logistic regression. The findings show that larger audit firms are associated with higher audit quality, whereas higher audit fees are associated with lower audit quality. Meanwhile, company size and audit tenure do not have a significant impact on audit quality. The results of this research enrich discussions regarding the factors that shape audit quality in developing economies and provide actionable insights for regulators, audit practitioners, and governance actors to enhance monitoring mechanisms and promote greater transparency

ABSTRACT Although decentralization has attracted increasing academic attention for its implications for firm performance and governance, its impact on financial intermediaries remains underexplored. This study examines how the allocation of decision-making rights within business groups influences audit fees. Using data from Chinese A-share listed firms from 2007 to 2023, we construct a novel firm-level measure of decentralization based on the distribution of decision rights between parent firms and subsidiaries. We find that greater decentralization is associated with higher audit fees, reflecting the additional audit effort and business risk required in more complex organizational structures. Mechanism tests confirm that decentralization increases audit effort, proxied by audit report lag, and elevated business risk, proxied by administrative expenses relative to sales. Heterogeneity analyses further show that the effect of decentralization on audit fees is stronger for groups with geographically dispersed subsidiaries and weaker when auditors have longer engagement tenure. Collectively, our findings highlight decentralization as a significant structural determinant of audit pricing and reveal how internal governance design shapes audit pricing decisions. These results provide new insights into the intersection of organizational structure and audit economics, with implications for auditors, managers, and regulators in emerging market contexts.

This study examines the impact of board interlocks on audit fees among firms listed on South Korea's KOSDAQ market. Board interlocks, created when directors serve on multiple boards, represent structural networks that can facilitate information exchange and coordination but may also compromise board independence. Although prior studies have explored the consequences of interlocks in mature markets, evidence from emerging, technology-oriented markets remains limited. This study addresses this gap by analysing whether board interlocks affect total and abnormal audit fees, which reflect auditors' risk assessments, effort, and pricing decisions. Using panel data, we estimate OLS and firm fixed-effects regressions and further validate the results through propensity score matching with fixed effects to mitigate endogeneity concerns. The findings show that inside directors' interlocks, initially associated with higher audit fees in OLS models, become significantly negative once firm-specific factors are controlled for, suggesting that inside directors' networks improve the information environment and reduce auditors' risk perception. Outside directors' interlocks show weaker and less robust negative effects. Overall, the results indicate that board interlocks can stabilise audit fees and enhance audit efficiency, contributing to the literature on corporate governance and audit pricing.

In Nigeria, various factors contribute to the issue of audit reporting lag among listed firms in Nigerian Exchange Group, with audit quality being one of the key contributors. The study examined the effect of audit Firm Size and Audit Opinion on audit report lag among listed firms in Nigerian Exchange Group from 2016 - 2023. The study specifically examines the effects of audit firm size and audit opinion on audit report lag. A quantitative approach was adopted, grounded in the positivist paradigm. Data analysis techniques, including descriptive statistics, correlation, and regression analysis, were used to evaluate the relationships between the audit qualities and audit report lag. The results indicate audit that firm size does not significantly influence audit report lag. However, audit opinion has positive and significant effects, suggesting that firms with higher audit fees or unfavorable audit opinions experience longer audit report lags. The study concludes that while audit firm size is not a determinant of audit report lag, audit opinion is. Larger firms tend to have shorter audit report lags, indicating greater efficiency in their audit processes. The study recommended that regulatory bodies to focus on streamlining the audit process through the adoption of advanced technologies that expedite financial reporting.

At present, the concept of Environmental, Social, and Governance (ESG) has been increasingly adopted as a strategic approach to management, aiming for sustainable growth. This approach influences the audit process and the auditor’s opinion on financial statements, as well as impact audit fee determination. This study investigates the relationship between ESG performance and audit fees among companies listed in the SET100 index of the Stock Exchange of Thailand. Both overall and all dimensions (environmental, social, and governance) were measured using data from the LSEG database. The sample includes 380 firm-year observations over five years from 2019 to 2023. The analysis employed multiple regression models with fixed effects, using STATA statistical software. The results reveal a statistically significant positive relationship between overall ESG performance and audit fees at the 0.01 level of significance. The analysis also found a positive association between the environmental and social dimensions, significant at the 0.05 level. Additionally, as control variables, firms' size and complexity were found to be positively associated with audit fees at the 0.05 significance level. In summary, the findings suggest that ESG performance influences audit scope, resulting in higher audit fees.

The main objective of the study is to examine the Moderating Effect of Agency Cost on Capital Structure and Value of Listed Firms in Nigeria. The study used an ex post facto design and analyzed data from 20 out of 38 Nigerian manufacturing firms from 2018 to 2023. It employed descriptive and inferential statistics with data sourced from financial statements and annual reports, analyzed using STATA 14. The study compared Pooled Ordinary Least Squares (POLS), Fixed Effects Model (FEM), and Random Effects Model (REM). While all models were significant, the Hausman test favored REM, but the Breusch and Pagan test ultimately suggested that the POLS model was more robust than REM. The regression analysis reveals long-term debt significantly increases firm's value, Short-term debt reduces firm value, and larger firms significantly have a higher value, higher audit fees with long-term debt significantly improves firm value, and Audit fees moderately mitigates the negative effects of short-term debt. Audit fees has a modest significant effect on firm value as firm size increases. The study recommended that Firms should optimize their long-term debt levels to enhance their value, while carefully managing associated risks, Firms should minimize the use of short-term debt to avoid financial risks that could negatively impact their value, Firms should aim for optimal growth that supports efficiency and risk management, avoiding the pitfalls of becoming too large, Firms should invest in higher-quality agency cost when leveraging long- term debt to enhance credibility and firm value, Firms should balance audit investments with debt management strategies to ensure sustained value and Large firms should continue to prioritize high-quality audits to safeguard their value.

We hypothesize that book-tax differences (BTD) consistency affects audit pricing because of its influence on audit risks. Specifically, we argue that a lack of consistency requires auditors to engage in greater effort during their audits to understand whether volatile BTD is reasonable and to ensure underlying factors contributing to such volatility are understood. Consistent with our hypothesis, we find a negative association between BTD consistency and audit fees after controlling for the magnitude of BTD and other firm characteristics. As further support, we find that the relation between consistency of BTD and audit fees is stronger for firms with better quality of auditors and higher tax planning incentives. These findings suggest that a lack of BTD consistency signals greater risk to auditors, and, consequently, results in higher audit fees.

In the area of corporate governance, the integrity of financial reporting is a cornerstone of stakeholder confidence and market efficiency. Audit quality plays a central role in ensuring the credibility of financial statements. High audit fees are usually an indication of extensive audit efforts and rigorous controls, reflecting auditors' commitment to detecting and reducing misstatements in financial reporting. This study explores the influence of financial reporting behaviours, namely earnings management, financial manipulation, and accounting conservatism, on audit quality. Based on agency theory, it examines how audit quality as a governance mechanism influences firms’ financial reporting strategies through variations in audit fees that reflect perceived audit risk and effort. The framework proposes that aggressive financial reporting practices may trigger heightened audit quality, while accounting conservatism may signal reduced audit risk. By synthesizing existing literature, this paper aims to develop a theoretical foundation for understanding the interplay between financial reporting behaviour and audit quality. The proposed model offers practical insights for auditors, regulators, and policymakers seeking to reinforce audit effectiveness and enhance financial reporting integrity in an increasingly complex corporate environment. This study emphasises the importance of audit quality in improving corporate transparency and ensuring financial integrity.

Social credit improvement, high abnormal audit fees and Audit Quality

This study investigates the relationship between audit quality attributes and earnings quality of selected deposit money banks in Nigeria. Using an ex-post facto research design, data were obtained from the audited financial statements of ten purposively selected banks listed on the Nigerian Exchange Group for the period 2015–2024. Audit quality attributes examined include Audit Firm Size (AFS), Audit Fees (AUF), Audit Independence (AUI), and Audit Tenure (AUT), while earnings quality was measured using Discretionary Accruals (DA). Descriptive statistics and Pearson Product Moment Correlation Matrix were used for analysis. The results reveal a strong positive correlation between Audit Firm Size and Audit Fees (r = 0.7445), and between Audit Firm Size and Earnings Quality (r = 0.6219). Audit Fees also showed a positive correlation with Earnings Quality (r = 0.5308), although a strong negative relationship was found between Audit Fees and Audit Independence (r = -0.8377). Audit Independence exhibited a strong positive correlation with Earnings Quality (r = 0.7074), underscoring its critical role in reducing earnings manipulation. Audit Tenure had a moderate positive correlation with Earnings Quality (r = 0.6246), but a negative correlation with Audit Fees (r = -0.7132), and a positive correlation with Audit Independence (r = 0.6987). These findings indicate that larger audit firms, higher audit fees, and auditor independence significantly improve earnings quality. However, prolonged audit tenure poses both opportunities and risks. The study recommends enhanced regulatory oversight to maintain auditor objectivity while balancing tenure and fee structures, ensuring transparent and high-quality financial reporting in the Nigerian banking sector.

This study investigates the effect of audit pricing, measured through normal and abnormal audit fees, on real earnings management (REM) in Nigerian non-financial listed firms. Using panel data from 50 firms listed on the Nigerian Exchange Group between 2013 and 2022, and employing Roychowdhury’s (2006) real earnings management model, the study finds a statistically significant negative relationship between normal audit fees and REM, β = -0.046, p = 0.0113. This suggests that higher audit fees, reflecting better audit quality and effort, deter managerial manipulation of earnings. Audit tenure also negatively correlates with REM, indicating that longer auditor-client relationships may enhance audit effectiveness. However, firm age, size, and loss indicators show no significant impact. The findings support agency theory’s premise that adequate audit remuneration mitigates agency conflicts by constraining managerial opportunism. Despite some contrasting literature, results emphasize the strategic importance of fair audit pricing to uphold financial reporting integrity. The study recommends that regulators enforce guidelines ensuring fair audit pricing linked to service quality, companies invest in high-quality audits as part of good governance, and auditors promote transparency in fee attribution to reinforce audit credibility. This research contributes empirical evidence to the nuanced relationship between audit fees and earnings management in emerging markets like Nigeria, highlighting audit pricing as a critical mechanism for enhancing audit quality and financial reporting transparency.