Work

Economic Freedom and Audit Fees: Evidence From the USA

Year: 2026

Type: article

Abstract: ABSTRACT We examine the association between US state‐level economic freedom and audit fees. We argue that economic freedom lowers clients' perceived business risk, thereby requiring reduced audit effort and exposing auditors to a lower probability of litigation risk, which enables auditors to charge lower audit fees to clients headquartered in states with high economic freedom. Using a US sample, we find a negative association between economic freedom and audit fees. Our study contributes to the emerging literature on socio‐economic determinants of audit fees by providing evidence that economic freedom reduces overall inherent risk, thereby reducing audit risks.

Source: Accounting and Finance

DOI: 10.1111/acfi.70187

Authors: Mahmud Hossain, Ahsan Habib, Dinithi Ranasinghe, Marlissa Phillips

Institutions: Clark Atlanta University, Massey University, University of Otago

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Peace, justice, and strong institutions, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,470