AAA Spark Meeting of the Regions

Effects of Greenhouse Gas Emissions and Climate-Change Policy on Audit Fees

• In Event: Climate & Political Activity

Abstract

We examine the relationship between US firms’ greenhouse gas (GHG) emissions and audit fees. Motivated by increases in the number and severity of extreme weather events that have brought GHG emissions to the forefront of social and governmental awareness, this investigation is a natural extension of prior literature linking socially irresponsible corporate behavior, audit risk, and audit fees. Using a unique sample of firms from the US Environmental Protection Agency (EPA) Greenhouse Gas Reporting Program (GHGRP), we find that increases in GHG emissions are positively associated with higher audit fees. In further analysis, we show that uncertainty surrounding the status of GHG regulation exacerbates the GHG-audit fee relationship. This paper contributes to the current body of literature examining the consequences of contributing to global climate change. Our findings provide new and significant information to regulators, business managers, and investors.

Authors

• Sue A. Cooper, Salisbury University

• Jared Cooper, Wicomico County Board of Education—JMB Science Dept