TITLE:
Supplier-Customer Geographic Distance and Audit Fee
AUTHORS:
Mingming Zhang
KEYWORDS:
Geographic Distance, Information Asymmetry, Audit Fee, Geographical
JOURNAL NAME:
Modern Economy,
Vol.11 No.2,
February
27,
2020
ABSTRACT: Audit fees have always been a topic of concern in
the field of accounting research at home and abroad. As far as the existing
literature is concerned, the research on audit fees is mostly concentrated on
the characteristics of the firm and the characteristics of the audited
entities. In recent years, as the supply chain has become the focus of
attention, customer characteristics have gradually been taken into account in
the scope of factors affecting audit fees. This paper selects the geographical
distance between the customer and the company as a customer feature for
research, and introduces geographical location factors into the field of audit
fees, and explores what impact the distance between customers and the company
would have on the audit fees. Earlier studies indicated that the two key
factors affecting audit fees are auditor efforts and litigation risks. This
paper uses the data of the top five customers disclosed by the
Shanghai-Shenzhen A-share listed companies in 2009-2016 to analyze the information
asymmetry of long-distance customer affects these two key factors to explore
the impact on audit costs. The study found that: 1) The farther the listed
company is from the main customers, the higher the audit fee is, and vice versa. 2) The
impact of listed company customer distance on audit fees is different between groups in different levels
of customer concentration and different levels of analyst attention. This paper
provides evidence that different customer geographic characteristics have
different impacts on audit fees.