The Relationship Between Audit Fees and Auditor Independence in the Banking Industry

Posted: Mar 30, 2022

• Jaxson Morgan
• Aubree Foster
• Sawyer Brooks

Abstract

The relationship between audit fees and auditor independence represents a fundamental concern in accounting and financial regulation, particularly within the banking industry where audit quality directly impacts financial stability. Traditional research has predominantly approached this relationship through linear models that assume straightforward trade-offs between economic dependence and professional objectivity. However, the banking sector's unique regulatory environment, capital requirements, and systemic importance suggest that these conventional frameworks may inadequately capture the complexity of auditor-client dynamics in financial institutions. This research addresses this gap by developing a novel methodological approach that integrates machine learning techniques with economic theory to uncover non-linear relationships and contextual moderators that influence how audit fees affect independence in banking contexts.