Does corporate social responsibility affect auditor-client contracting? Evidence from auditor selection and audit fees |
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| Institution: | 1. Faculty of Liberal Arts and Professional Studies, York University, Keele St., Toronto 4700, ON, Canada;2. Lazaridis School of Business and Economics, Wilfrid Laurier University, 75 University Ave., Waterloo, ON, Canada;3. Asper School of Business, University of Manitoba, 181 Freedman Cres., Winnipeg, MB, Canada;1. Associate Professor of Accounting, College of Business, University of Montana, USA;2. Associate Professor of Accountancy, College of Business and Economics, Boise State University, USA;3. Associate Professor of Accounting, College of Business, University of Nevada, Reno, USA |
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| 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. |
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