Extended auditor disclosure, workload pressures and audit fees: evidence from UK

Although a considerable number of studies have investigated the determinants and consequences of audit fees, studies examining how and why key audit matters, workload pressure, and audit quality might influence its audit firm pricing strategies are rare. Thus, this study examines the impact of key audit matters, workload pressure and audit quality on audit fees. Consequently, we further explore whether audit quality might moderate workload pressure-audit fees relationship. Using a large sample of UK firms for a recent time period (2010–2016) in which there were substantial structural changes in the audit market regulation; our results are three-fold. First, our findings show that workload pressure has a significant and positive pressure on audit fees. Furthermore, we find that the impact of workload pressure differs between high-quality and low-quality audit firms. When clients enjoy greater audit quality, auditors in busy seasons are likely to pass on the scale economy and efficiency benefits to their audit clients and charge them less. Finally, our results indicate that audit fees are high in corporations with high key audit matters. These results are consistent with current economic and behavioural theory and previous research suggesting that workload pressures and key audit matters have pressure effects on the audit fees. Our results have significant implications for audit firms, audit committees, and policy makers.