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February 8, 2026Journal of Accounting Auditing & Finance0 citations

Are Audit Fees Discounted in Initial Year Audit Engagements? Further Evidence From U.S.-Traded Foreign Companies

THTing-Chiao Huang HHHua‐Wei HuangNational Cheng Kung University SHStephanie HairstonGeorgia Southern University

Key Points

This research aims to determine if initial-year audit fee discounting occurs in U.S.-traded foreign companies and its implications for audit quality.
Analyzed a sample of 5,568 company-years from 2007 to 2018
Adjusted for measurement bias identified by Barua et al. (2020)
Examined the relationship between audit fee discounting and regulatory environments
Found evidence of audit fee discounting in initial engagements
Extent of discounting varies based on regulatory environments
Mixed evidence on the impact of fee discounting on audit quality

Abstract

This paper investigates whether initial-year audit fee discounting occurs in U.S.-traded foreign companies. Using a sample of 5,568 company-years from 2007 to 2018, we find evidence of fee discounting after accounting for measurement bias identified by Barua et al. (2020). Our analysis also suggests that the extent of discounting varies based on regulatory environments and the economic significance of these companies to their auditors, including both audit and nonaudit services. However, we find mixed evidence on whether fee discounting impacts audit quality.

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