Economic Freedom and Audit Fees: Evidence From the USA

Accounting and Finance 2026 Open access

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Authors: Mahmud Hossain, Ahsan Habib, Dinithi Ranasinghe, Marlissa Jones Phillips
DOI: 10.1111/acfi.70187
Cited by: 0
References: 63

Abstract

ABSTRACT We examine the association between US state‐level economic freedom and audit fees. We argue that economic freedom lowers clients' perceived business risk, thereby requiring reduced audit effort and exposing auditors to a lower probability of litigation risk, which enables auditors to charge lower audit fees to clients headquartered in states with high economic freedom. Using a US sample, we find a negative association between economic freedom and audit fees. Our study contributes to the emerging literature on socio‐economic determinants of audit fees by providing evidence that economic freedom reduces overall inherent risk, thereby reducing audit risks.

Fields of Study & Subjects

Auditing Earnings Management Governance Corporate Governance and Financial Management Corporate Finance and Governance

Publication details

Journal / source
Accounting and Finance
Volume
66
Issue
2
Pages
1432–1454
Publication date
9 February 2026
Language
EN