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Social credit improvement, high abnormal audit fees and audit quality

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  • Li, Li
  • Jin, Zheng
  • Yuan, Jiawen
  • Cui, Haihong

Abstract

This study explores the influence of social credit improvement on high abnormal audit fees and audit quality, based on China's Social Credit System pilot policy. Using data from China’s A-share listed companies from 2008 to 2023, this paper demonstrates that the improved social credit reduces high abnormal audit fees by mitigating litigation risks, enhancing audit efficiency, and then improve the audit quality. This suggests that the social credit system generates positive externalities in financial reporting oversight. The reduction effect is more pronounced in non-state-owned enterprises and those audited by shorter-tenured auditors.

Suggested Citation

  • Li, Li & Jin, Zheng & Yuan, Jiawen & Cui, Haihong, 2025. "Social credit improvement, high abnormal audit fees and audit quality," Finance Research Letters, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pb:s1544612325011870
    DOI: 10.1016/j.frl.2025.107929
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    References listed on IDEAS

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