Sales Order Backlog and Audit Fees

ABSTRACT This study examines the association between sales order backlog and audit fees. We hypothesize that backlog indicates operating, supply chain and financial reporting quality risks, leading to higher audit fees. Analysing US‐listed firms from 2000 to 2022, we find a positive relationship between order backlog and audit fees. Moreover, the positive association strengthens with heightened supply chain risk, suggesting that auditors adjust audit fees for order backlog‐related risks. The association is more pronounced for firms with make‐to‐stock practices. Our findings are robust to several endogeneity tests. This study contributes to the audit fee literature by demonstrating the positive association between order backlog and audit fees, enhancing our understanding of audit fee determinants.