Does ESG washing affect audit fees?

Washing undermines the credibility of ESG information. This study examines the impact of corporate greenwashing and brownwashing on audit fees using a sample of Chinese A-share listed companies from 2009 to 2022. We document that greenwashing increases audit fee premiums, while brownwashing decreases them. This result holds after extensive robustness testing. Further analysis shows that both practices affect firms' operational and information risks, which in turn influences audit fees. Government regulation and media scrutiny significantly amplify these effects. In addition, we find that auditors reduce audit time for greenwashing firms but increase it for brownwashing firms; correspondingly, the likelihood of issuing modified audit opinions increases for greenwashing firms and decreases for brownwashing firms. By extending ESG research to washing behaviors, our study offers theoretical and practical contributions to understanding audit governance in emerging markets.