Why Do ESG Rating Differences Affect Audit Fees?—Dual Intermediary Path Analysis Based on Operating Risk and Analyst Earnings Forecast Error

Lufeng Gou () and Xiaoxiao Li
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Lufeng Gou: Business School, Qingdao University of Technology, Qingdao 266000, China
Xiaoxiao Li: Business School, Qingdao University of Technology, Qingdao 266000, China

Sustainability, 2025, vol. 17, issue 2, 1-17

Abstract: As environmental, social, and governance (ESG) issues become increasingly important, ESG ratings have become a significant factor influencing audit fees for businesses. However, ESG ratings are typically assessed by multiple agencies or rating firms and, due to differences in evaluation criteria, methodologies, and data sources, the ratings provided by different institutions may vary considerably. Therefore, research on the impact of discrepancies in ESG ratings on audit fees is of great significance. This paper examines this phenomenon by analyzing a sample of Chinese listed companies from 2015 to 2022, yielding 3056 observational values through various methodologies. The study employs two-way fixed effects methods. The findings indicate that discrepancies in ESG ratings significantly elevate enterprises’ audit expenses, with operating risk and analyst earnings forecast errors serving as intermediary factors. Additionally, media attention intensifies these effects by increasing corporate disclosure, intensifying regulatory pressure, and heightening reputational risks for the company, and the positive impact of ESG rating discrepancies on audit fees is more significant when the “Big 4” accounting firms are involved in the audit. The research offers insights for enterprises, auditors, and regulatory bodies, contributing to the enhanced implementation of the ESG concept and fostering sustainable enterprise development.

Keywords: media attention; audit cost; operating risk; analyst earnings forecast error; sustainability accounting (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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