Supplier-Customer Geographic Distance and Audit Fee

Abstract

Audit fees have always been a topic of concern in the field of accounting research at home and abroad. As far as the existing literature is concerned, the research on audit fees is mostly concentrated on the characteristics of the firm and the characteristics of the audited entities. In recent years, as the supply chain has become the focus of attention, customer characteristics have gradually been taken into account in the scope of factors affecting audit fees. This paper selects the geographical distance between the customer and the company as a customer feature for research, and introduces geographical location factors into the field of audit fees, and explores what impact the distance between customers and the company would have on the audit fees. Earlier studies indicated that the two key factors affecting audit fees are auditor efforts and litigation risks. This paper uses the data of the top five customers disclosed by the Shanghai-Shenzhen A-share listed companies in 2009-2016 to analyze the information asymmetry of long-distance customer affects these two key factors to explore the impact on audit costs. The study found that: 1) The farther the listed company is from the main customers, the higher the audit fee is, and vice versa. 2) The impact of listed company customer distance on audit fees is different between groups in different levels of customer concentration and different levels of analyst attention. This paper provides evidence that different customer geographic characteristics have different impacts on audit fees.