The Risk Premium of Audit Fee: Evidence from the 2008 Financial Crisis

Tianshu Zhang and Jun Huang

China Journal of Accounting Studies, 2013, vol. 1, issue 1, 47-61

Abstract: This paper uses the 2008 financial crisis to examine the association between audit pricing and firm risk. The empirical analysis shows that when firm risk increased during the crisis, accounting firms charged more for their auditing services, supporting the risk premium of audit fee. An analysis of different industries presents a positive correlation between the audit fees and firm risk for export companies that were seriously shocked by the crisis. Further, compared with private firms, the audit fees of State-Owned Enterprises (SOEs) did not increase with firm risk under the crisis, due to the government’s bailout guarantee. Finally, the risk premium of audit fee was only found for companies audited by non-Big Four accounting firms.

Date: 2013
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DOI: 10.1080/21697221.2013.781766

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