Evaluating the Relationship Between Audit Fees and Audit Quality in Competitive Accounting Markets

Posted: Aug 15, 2022

• Cole Graham
• Landon Holt
• Peyton Fisher

Abstract

The relationship between audit fees and audit quality represents one of the most extensively examined yet persistently controversial topics in accounting research. Traditional economic theory posits a straightforward positive correlation between audit fees and quality, suggesting that higher compensation enables auditors to allocate greater resources, exercise enhanced professional skepticism, and maintain independence from client pressure. However, the dramatic transformation of accounting markets over the past decade—characterized by intensified competition, regulatory changes, and technological disruption—demands a re-examination of this fundamental assumption. The increasing concentration of audit services among a shrinking number of large firms, coupled with client demands for cost containment,