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We examine whether industry-specialist auditors charge lower fees to clients who are increasingly involved in corporate social responsibility (CSR) activities than do non-industry-specialist auditors. Many researchers have found that industry-specialist auditors often charge a fee premium over non-industry specialists (Craswell, Francis, and Taylor 1995; DeFond, Francis, and Wong 2000). At the same time, recent studies indicate that when examining all audit firms, socially responsible companies are offered audit fee discounts while socially irresponsible companies are charged fee premiums (Koh and Tong 2013; Chen, Srinidhi, Tsang, and Yu 2013; Brooks, Liu, and Moffitt 2015). The question arises of whether industry-specialist auditors charge the same fees as non-industry specialists regardless of a company’s CSR activities or whether industry specialists’ fees are adjusted in accordance with a company’s level of social responsibility. Consistent with our hypothesis, results indicate that increased (decreased) levels of CSR result in lower (higher) industry-specialist audit fees. This result is encouraging because it implies that industry-specialist auditors value socially responsible clients and illustrates one of the benefits of incorporating CSR into a company’s activities.
Li Zheng Brooks, Washington State University
Christine Haynes, University of West Georgia
Linxiao Liu, University of West Georgia