Financial Reporting Transparency and Audit Fees

We investigate the relationship between corporate reporting transparency and audit fees. We predict that higher quality of information disclosure and better corporate reporting transparency can decrease the information asymmetry between the firms and outsiders, reducing the amount of audit risk, resulting in less audit work and lower audit fees. We find evidence of a negative relationship between financial reporting transparency and audit fees. Our results are relevant to public firms, regulators, and the public at large as they demonstrate another possible benefit to greater corporate reporting transparency