TITLE:
Environmental Risk and Audit Fees: Evidence from Monitoring of PM2.5
AUTHORS:
Yue Wu
KEYWORDS:
Environmental Risk, Internal Control, Audit Fees, PM2.5
JOURNAL NAME:
Open Journal of Business and Management,
Vol.6 No.2,
April
20,
2018
ABSTRACT: Previous studies have found many factors that affect audit fees, such as company
size, business complexity, internal control quality, firm characteristics
and so on. Under the background of increasingly severe environmental problems,
environmental risks will inevitably affect the business conditions of the
company and thus affect the auditor’s judgment of risks. However, we know
little about whether and how environmental risks affect audit fees. In this paper,
we use the monitoring after the PM2.5 explosion as an exogenous event,
and the propensity matching score method and the difference-in-difference
model are used to study the relationship between environmental risk and audit
fees. The empirical results show that, first, after the monitoring of PM2.5
began in 2012, those listed companies located in cities that take the lead in
monitoring PM2.5 would be charged higher audit fees. Second, this relationship
exists only in heavily polluting enterprises with low internal control quality.