Abstract
This paper examines the effect of audit fee regulation on audit fees and audit outcomes. Leveraging the staggered introduction of audit fee restrictions in different Chinese provinces, we find that audit fee regulation is effective in curbing lowballing behaviours and improving audit quality. The increased audit independence and audit efforts are the main mechanisms. The relation between audit fee regulation and audit quality is more pronounced (1) when client firms have more external monitoring (2) when firms have pre-regulation lowballing behaviours. Overall, our findings offer plausibly causal evidence that curbing low-price competition in the audit market leads to improved audit outcomes. © 2025 The Author(s). Accounting & Finance published by John Wiley & Sons Australia, Ltd on behalf of Accounting and Finance Association of Australia and New Zealand.
| Original language | English |
|---|---|
| Number of pages | 17 |
| Journal | Accounting and Finance |
| Online published | 16 Sept 2025 |
| DOIs | |
| Publication status | Online published - 16 Sept 2025 |
Bibliographical note
Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).Funding
We gratefully acknowledge the funding provided by the Humanities and Social Sciences Youth Foundation from China's Ministry of Education (23YJC790126).
Research Keywords
- abnormal audit fees
- audit fee regulation
- audit quality
- lowballing
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