Does corporate social responsibility affect auditor-client contracting? Evidence from auditor selection and audit fees. (December 2020)

• Record Type: Journal Article
• Authors: Du, Shuili; Xu, Xiaolu; Yu, Kun
• Is Part Of: Advances in accounting. Volume 51(2020)
• Publication Date: 2020-12
• Subjects: Big N auditors -- Audit fees -- Corporate social responsibility -- Auditor-client contracting; Accounting -- Periodicals; 657.05
• DOI: 10.1016/j.adiac.2020.100499
• Languages: English
• ISSNs: 0882-6110

Abstract

Abstract: We find that firms with higher CSR performance are more likely to choose Big N auditors and less likely to switch to non-Big N auditors, consistent with socially responsible firms demanding higher audit quality. Furthermore, we provide robust evidence that firms with higher CSR performance pay lower audit fees using both levels and changes models, suggesting that higher CSR performance reduces auditor engagement risk. Our analysis based on the difference-in-differences approach indicates that it is higher CSR performance that leads to lower audit fees, not vice versa. Overall, the results highlight the important role of CSR performance in auditor-client contracting.