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Nip in the bud:Spillover effect of customer earnings pressure on supplier audit fees

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Listed:
  • Li, Huicong
  • Liu, Jiayi
  • Wu, Chao

Abstract

This study examines how customer earnings pressure affects supplier audit fees. Measured as the shortfall of actual performance relative to analyst forecasts, customer earnings pressure significantly increases supplier audit fees. Further analysis indicates that the promotion effect stems from auditors’ expanded workload to mitigate risks, rather than from audit opinion shopping. Information transparency and synergy effect among financial intermediaries strengthen risk surveillance across supply chains. These findings develop a model of risk contagion along supply chains and offer insights into audit pricing.

Suggested Citation

  • Li, Huicong & Liu, Jiayi & Wu, Chao, 2025. "Nip in the bud:Spillover effect of customer earnings pressure on supplier audit fees," Finance Research Letters, Elsevier, vol. 86(PB).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pb:s1544612325017234
    DOI: 10.1016/j.frl.2025.108469
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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